NAV Meaning in Mutual Fund
NAV meaning in a mutual fund comes down to one number: net asset value, the price of one unit of a scheme on a given day. SEBI defines it as the scheme’s total assets minus its total liabilities, divided by the number of units outstanding. Buy units and you are allotted them at that price. Redeem and your proceeds are worked out on the applicable NAV, less any exit load. What tax you owe on the gain depends on your own position and the rules in force.
Most explanations stop there, and the two questions people actually have go unanswered. A low NAV does not make a fund cheap, and the reason is arithmetic. And the NAV you get is not the one showing when you press confirm; it depends on when your money reaches the fund’s bank account.
Dhanvantri Capital Services Private Limited, known as Dhanvantree, is an AMFI-registered mutual fund and Specialised Investment Fund distributor, ARN-194216, and a distributor of portfolio management services registered with APMI, APRN10201. This page is general information, not a computation of your position.
NAV meaning in a mutual fund: what the number actually is
Unit price, and nothing more. SEBI’s investor FAQ puts it plainly: NAV is “the unit price of a mutual fund scheme”, arrived at by “dividing the net assets (Total Asset – Total Liabilities) of the scheme by the total number of outstanding units” on that date.
Three consequences follow from that definition, and they are where most misreadings of NAV meaning in a mutual fund begin.
NAV is backward looking. It reports what the holdings were worth at the last valuation, not what they will be worth. It is a price, not a forecast and not a quality score.
NAV is already net of costs. The scheme’s expenses are charged against assets every business day before the NAV is struck, so the figure you see has the fee taken out. The cost shows up as a lower NAV rather than as a debit from your bank account. How those expense limits are set is covered in assets under management.
NAV is not comparable between schemes. Two funds holding identical shares can show ₹12 and ₹340 purely because they started at different NAVs or have distributed income differently since launch.
NAV meaning in a mutual fund, as a calculation
Take everything the scheme owns at market value on that day. Add cash and amounts receivable. Subtract what it owes, including the expense accrued for the day. Divide the result by the number of units outstanding. The arithmetic is the same for every open-ended scheme, and the fund house runs it once each business day.
NAV = (market value of holdings + cash and receivables − liabilities) ÷ units outstanding
The valuation happens once a day for most schemes, after the markets close. Each plan of the scheme gets its own NAV for that valuation date, and every transaction assigned to the date uses the NAV of the relevant plan, whichever platform was used. Which date a transaction is assigned to is the subject of the cut-off rules below. Units of an open-ended scheme are bought and sold at the scheme’s own NAV rather than at a price set by buyers and sellers, so there is no intraday price and no bid-offer gap. That is one of the real differences from buying a share.
Exchange traded funds are the exception. Their units trade on the exchange through the day at whatever price buyers and sellers agree, which can sit above or below the scheme’s NAV.
Why a low NAV does not mean a cheap fund
One common misconception about NAV, and it costs nothing in fees but sends people into the wrong scheme for the wrong reason. The belief is that a ₹10 unit has more room to grow than a ₹500 unit. Nothing in the arithmetic supports it.
A ₹10 NAV buys more units than a ₹100 NAV. It does not buy more of anything. If two investments earn the same percentage return, the same money ends at the same value whatever NAV it started from. The unit count is not what changes the answer.
Put ₹1,00,000 into three schemes and assume each rises 12%.
| Scheme NAV | Units you get | NAV after a 12% rise | Your value |
|---|---|---|---|
| ₹10 | 10,000.00 | ₹11.20 | ₹1,12,000 |
| ₹100 | 1,000.00 | ₹112.00 | ₹1,12,000 |
| ₹500 | 200.00 | ₹560.00 | ₹1,12,000 |
Identical, because the assumed return is identical. This does not mean two schemes will return the same thing: they hold different portfolios, and that is what separates them. The unit count is only a denomination, like being handed a hundred ten-rupee notes instead of ten hundred-rupee notes.
A new fund offer priced at ₹10 is therefore not a discount. It is a scheme with no track record, priced at the standard starting figure. A high NAV, equally, is not evidence of skill. It often reflects a longer operating history or past growth, and by itself says nothing about quality.
What does tell you something is the change in NAV over a period, published separately as the scheme’s return. Even that needs care on a scheme that distributes income, because part of the gain left the NAV as a payout rather than staying in it.
Which day's NAV you get when you buy
The rule that surprises people most. Your NAV is not fixed by the moment you submit the application. It is fixed by when the money is actually credited to the scheme’s bank account, and by whether that credit lands before the cut-off for that scheme type. Platforms rarely spell this out at checkout.
From 1 February 2021 this applies irrespective of the amount invested, a point AMFI states directly. The older threshold, under which small purchases were treated differently, is gone. Pages still quoting a ₹2 lakh limit are out of date.
| Scheme type | Cut-off | Application in and funds available for use before cut-off | Funds not available for use before cut-off |
|---|---|---|---|
| Equity and debt schemes | 3.00 pm | “The closing NAV of the day on which the application is received” | “Closing NAV of the day on which the funds are available for utilization” |
| Liquid and overnight schemes | 1.30 pm | Closing NAV of the day immediately preceding the day of receipt | Closing NAV of the day before the funds become available |
Read the right-hand column carefully, because the phrase that matters is available for utilization, not credited. Money that lands at 5 pm is not available for use that day, the cut-off having passed. SEBI’s own worked example takes a Monday application with funds realised at 5 pm on Wednesday and allots at Thursday’s NAV.
An application received after the cut-off generally takes the next business day’s closing NAV, provided the full amount is available for use before that day’s cut-off. If the money lands later than that, the NAV moves to a later business day again.
For redemption from an equity or debt scheme the cut-off is also 3.00 pm, and an application in before it takes that day’s closing NAV. Liquid and overnight schemes follow their own redemption rules, set out below.
What this means in practice:
- A UPI payment made at 2.55 pm whose funds reach the scheme at 3.04 pm does not get that day’s NAV. The full amount was not available for use before the cut-off.
- A NEFT transfer sent on Friday evening credits on the next banking day. The NAV follows the realisation, not the Friday instruction.
- A cheque follows the day it clears, subject to the same cut-off.
- A systematic investment plan instalment is a purchase like any other. A systematic investment plan instalment follows the ordinary purchase rules. The instalment date by itself does not secure that day’s NAV; the date the money becomes available for use decides it. AMFI’s illustration puts the common case plainly: units are allotted at that date’s NAV “only if the money is received/credited” in time, and otherwise “the SIP units will be allotted units at the NAV of the next business day”. Where the money takes longer than that, the NAV moves out with it.
How much this matters depends on the transaction. On a monthly instalment in a long-running plan the effect is usually small. On a large one-off purchase, or on money parked in a liquid scheme for a few days, a day’s NAV movement is the whole return.
What changed for overnight schemes in June 2025
A rule almost no page on this subject carries yet, and it is in force now. Overnight schemes are where people park cash for a few days, so exit timing matters more here than anywhere else. SEBI moved that timing in 2025 and added a later deadline for online requests.
SEBI circular SEBI/HO/IMD/PoD2/P/CIR/2025/56, dated 22 April 2025, changed the cut-off for repurchase of units in overnight schemes with effect from 1 June 2025. Two timings now run side by side.
| Repurchase request | Cut-off | NAV that applies |
|---|---|---|
| Not online | 3.00 pm | In before the cut-off: the closing NAV of the day immediately preceding the next business day. After it: the closing NAV of the next business day. |
| Online | 7.00 pm | The same two outcomes, measured against 7 pm instead of 3 pm. |
In the circular’s own words, the applicable NAV where the request arrives up to the cut-off is “the closing NAV of day immediately preceding the next business day”, and after it, “the closing NAV of the next business day”. For online requests the circular provides that “the cut-off timing of 7 PM shall be applicable for overnight fund schemes”.
So an online repurchase keeps the earlier NAV treatment until 7 pm, while the same request made at a branch or on paper is measured against 3 pm. The extension covers overnight schemes only, and repurchase only. It does not reach liquid schemes, equity schemes or purchases of any kind. Platforms often set their own internal deadline earlier than SEBI’s, so check yours.
When NAV is published, and why your app shows yesterday
Valuation takes time, so SEBI sets a declaration deadline rather than requiring a live figure. That deadline is not the same for every scheme type, which is why some holdings in your portfolio refresh in the evening and others only the following morning. Nothing is broken when that happens.
| Scheme type | NAV must be declared by |
|---|---|
| Most schemes | 11 pm on the transaction day |
| Schemes with exposure to exchange traded commodity derivatives | 9 am the next business day |
| Fund of funds schemes | 10 am the next business day |
| Schemes with at least 80% in permissible overseas investments | 10 am the next business day |
A fund of funds invests in other schemes, so it cannot be valued until those schemes have declared their own NAVs. That is the whole reason for the extra morning.
NAV is also declared only on business days. A portfolio checked on Sunday shows Friday’s figure, and nothing has gone wrong.
Why one scheme has two different NAVs
Direct and regular plans of the same scheme hold exactly the same portfolio and run the same strategy, yet publish two different NAVs. The underlying holdings are identical; the expenses charged against them are not, and over time that produces different NAVs and different returns on the same portfolio.
A regular plan carries the cost of distribution. A direct plan does not, so less is deducted from its assets each day and its NAV drifts above the regular plan’s over time. Both numbers are correct; they describe the same holdings after different charges.
What the gap becomes, on ₹10,00,000 at an assumed 12% before expenses:
| Plan | Expense ratio | After 10 years | After 15 years |
|---|---|---|---|
| Regular plan | 1.70% | ₹26,65,355 | ₹43,51,437 |
| Direct plan | 0.70% | ₹29,17,102 | ₹49,82,272 |
Illustrative figures, not a quotation or a forecast. Subtracting a fixed expense ratio from a fixed 12% is a simplified way to show the mechanism. Real returns are not fixed, and expense ratios vary by scheme and change over time.
What the regular plan’s higher expense pays for is the distribution service: onboarding, paperwork, transaction support and the ongoing relationship. Distributor commission is paid out of the regular plan’s costs and is reflected in its expense ratio. Dhanvantree is a mutual fund distributor and is remunerated on that basis, which you should weigh when reading this section. Whether the service is worth the difference to you is a judgement only you can make, and the choice is yours.
What moves NAV apart from the market
Four things change the number, and only one of them is the market. The other three catch people out, because the NAV moves on a day when nothing obvious has happened to the holdings. Knowing which is which saves a worried phone call to the fund house.
Prices of the holdings. The main driver, every day.
Daily expense accrual. A small, steady drag, already inside the published figure.
An IDCW payout. Income distribution cum capital withdrawal reduces NAV by the amount distributed per unit, on the record date set out in the scheme’s notice. Ignoring other market movement, a ₹2 per unit distribution reduces a ₹48.50 NAV by ₹2. Where tax is deducted at source on the distribution, the amount credited to your bank is lower than the declared payout, so the NAV fall and the bank credit need not be the same figure. Nothing was earned or lost by the fall itself.
Subscriptions and redemptions. These change the scheme’s assets and its units outstanding together, so they move the scheme’s size without moving NAV in proportion. They can still affect what the manager is able to hold, which shows up in returns later rather than in the day’s NAV.
A fall in NAV on a record date is therefore not a loss in itself, and it is a frequent source of worried calls. What you keep from the distribution still depends on the tax on it.
Frequently Asked Questions
The price of one unit of the scheme on a given day, worked out as total assets minus total liabilities, divided by units outstanding.
No. NAV alone does not tell you whether one scheme is better value than another. Only the unit count differs between a low and a high NAV, and the unit count says nothing about what the scheme holds or what it has returned.
That day’s, if the money is in the scheme’s bank account and available for use before 3.00 pm. If it lands after the cut-off it was not usable that day, and SEBI’s worked example puts you on the next business day’s NAV. Application time alone does not decide it.
No. Since 1 February 2021 the rule applies to every purchase, whatever the amount.
Fund of funds schemes have until 10 am the next business day to declare NAV, because they must wait for the underlying schemes to declare theirs first.
Check whether the scheme paid an IDCW. NAV falls by the payout per unit on the record date, and the money has gone to unit holders rather than disappeared.
No. NAV is set once a day from the valuation of the whole portfolio. Share prices move continuously. Exchange traded funds are the exception, because their units trade on the exchange and can sit above or below NAV.
AMFI publishes the NAV of every scheme daily, and each fund house publishes its own. Use the scheme’s full name including the plan, because direct and regular plans of the same scheme carry different NAVs. The different kinds of scheme are set out in types of mutual funds.
Disclaimer: The views expressed here are of the author and do not reflect those of Dhanvantree. Mutual funds are subject to market risks, please read the scheme documents carefully before investing.