NAV, Sale and Repurchase Price

What is NAV?

The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV). In simple words, NAV is the market value of the securities held by the scheme.

Mutual funds invest the money collected from investors in securities markets. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis.

The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date.

For example, if the market value of securities of a mutual fund scheme is INR 200 lakh and the mutual fund has issued 10 lakh units of INR 10 each to the investors, then the NAV per unit of the fund is INR 20 (i.e.200 lakh/10 lakh). NAV is required to be disclosed by the mutual funds on a daily basis. The NAV per unit of all mutual fund schemes have to be updated on AMFIís website and the Mutual Funds’ website by 9 p.m. of the same day. Fund of Funds are allowed time till 10 a.m. the following business day to update the information.

Unlike stocks (where the price is driven by the market and changes from minute-to-minute) , mutual funds don't declare NAVs through the day.

Instead, NAVs of all mutual fund schemes are declared at the end of the trading day after markets are closed, in accordance with SEBI Mutual Fund Regulations. Further, as per SEBI Mutual Fund Regulations, for all mutual fund schemes, other than liquid fund schemes, the mutual fund Units are allotted only at prospective NAV, i.e., the NAV that would be declared at the end of the day, based on the closing market value of the securities held in the respective schemes.

Thus, what is important here is the cut-off time for submission/receipt of the transaction – If you invest before the cut-off time, you will get the end-of-day NAV of that particular business day. The cut off time for purchase transactions for all mutual fund schemes other than liquid fund schemes is 3:00 p.m. This means that if you have invested till 3:00 p.m. on a particular day, you will get that day's NAV.

A mutual fund may accept applications even after the cut-off time, but you will get the NAV of the next business day. Further, the cut-off time rules apply for redemptions too.

How is NAV determined?

Liquid Funds

- Subscription

  • Where the application is received up to 2.00 p.m. on a day and funds are available for utilization before 2:00 p.m. without availing any credit facility, the closing NAV of the day immediately preceding the day of receipt of application.
  • Where the application is received after 2.00 p.m. on a day and funds are available for utilization on the same day without availing any credit facility, the closing NAV of the day immediately preceding the next business day; and
  • Irrespective of the time of receipt of application (before or after 2:00 p.m. on a day), where the funds are not available for utilization before 2:00 p.m. without availing any credit facility, the closing NAV of the day immediately preceding the day on which the funds are available for utilization.

- Redemption

  • Where the application is received up to 3.00 pm – the closing NAV of day immediately preceding the next business day; and
  • Where the application is received after 3.00 pm – the closing NAV of the next business day.

Other Schemes [other than Liquid Funds]

a. Subscription

amount less than ₹2 lakh

  • Where the application is received up to 3:00 p.m., closing NAV of the day on which the application is received.
  • 2. Where the application is received after 3:00 p.m., closing NAV of the next business day.

For amount equal to ₹2 lakh or more

  • Where the application is received up to 3:00 p.m. and funds are available for utilization before 3:00 p.m., closing NAV of the day on which the application is received.
  • Where the application is received after 3:00 p.m. and funds are available for utilization, closing NAV of the next business day.
  • Irrespective of the time of receipt of application (before or after 3:00 p.m.), where the funds are not available for utilization, closing NAV of the day on which the funds are available for utilization.

b. Redemption

  • Where the application is received up to 3.00 pm – closing NAV of the day on which the application is received; and
  • Where the application is received after 3.00 pm – closing NAV of the next business day.

What is Sale and Repurchase Price?

Sale Price

  • Sale Price is the price payable per unit by an investor for purchase of units (subscription) and/or switch-in from other schemes of a mutual fund.
  • SEBI vide circular no. SEBI / IMD / CIR No. 4 / 168230 / 09 dated June 30, 2009 has abolished Entry Load for all mutual fund schemes.
  • Hence, during the New Fund Offer (NFO), the Sale Price per unit is at Face Value per unit specified in the respective Scheme Information Document (SID) and Key Information Memorandum (KIM) and during the ‘Ongoing Offer’ period (i.e., the date from which the scheme re-opens for subscriptions/redemptions after the closure of the NFO period.), the units may be purchased at the Net Asset Value (NAV), i.e., the Sale Price per unit is equivalent to applicable NAV on the date of subscription.

Repurchase/Redemption Price

  • The Repurchase/Redemption Price is the price per Unit at which a Mutual Fund would ‘repurchase’ the units (i.e., buys back units from the investor) upon redemption of units or switch-outs of units to other schemes/plans of the Mutual Fund by the investors, and includes Exit Load, if / wherever applicable.

Redemption price is calculated as follows:

Redemption Price = Applicable NAV*(1- Exit Load, if any)

For Example: If the Applicable NAV is ₹10 and Exit Load is 2%, then the Redemption Price will be = ₹10* (1-0.02) = ₹9.80

It may be noted that an AMC / Trustee has the right to modify existing Exit Load structure and/or to introduce Exit Loads subject to a maximum limits prescribed under the Regulations.

Any change in Load structure will be effective on prospective basis and will not affect the existing mutual fund units in any manner.

As per SEBI (Mutual Funds) Regulations, 1996, in respect of Open Ended Schemes, Repurchase Price (commonly referred to as Redemption price) shall not be lower than 93% of NAV. Provided that in respect of Closed Ended Schemes, the Repurchase Price of the units shall not be lower than 95% of the scheme NAV.