25 Jun 2023


If you are planning investments, it's important to understand what is NAV in mutual funds. NAV, or Net Asset Value, is defined as the per-unit price of a mutual fund scheme. It determines the cost of the mutual fund scheme's units when buying and selling them. Unlike the share prices, which fluctuate throughout market trading hours, the Net Asset Value is generally calculated at the end of each day. The Net Asset Value is then adjusted against expenses associated with the mutual fund's Scheme, such as fund management, administration, distribution costs, etc., as applicable. This blog attempts to explain in detail what NAV is in mutual funds.

 NAV Meaning:

The performance of a mutual fund scheme is denoted by its NAV per unit. Essentially, NAV per unit is calculated by dividing the market value of a scheme's securities by the total number of units issued to investors on a given date.

The NAVs of the Scheme are calculated and updated every Business day on AMFI's website, www.amfiindia.com, by Asset Management Companies within the specified timelines given by Regulator. The First NAV of the schemes shall be declared within 5 working days from the date of allotment. Now that we know the NAV meaning let's see how NAV is calculated.

How is NAV Calculated?

Now that you have understood the basic meaning of Net Asset Value, you may be interested in learning about NAV calculation. This can be explained using an example.The NAV calculation formula of units under the Scheme is shown below:

NAV image

NAV= (Value of stocks + Value of bonds + Value of money market instruments + Dividend accrued but not received + Interest accrued but not received – Fees payable) No of outstanding units

Say the Market Value of stocks is Rs. 250 crores; Market Value of bonds: Rs. 60 crores · Market Value of money market instruments: Rs. 3.2 crore · Dividend accrued but not received: Rs. 1.09 crore · Interest accrued but not received: Rs. 2.68 crore · Fees payable: 0.23 crore · No. of outstanding units: 1.80 crore, then the NAV calculation will be: 

NAV = 250 + 60 + 3.20 + 1.09 + 2.68 – 0.23)/1.80 = 316.74/1.80 = 175.9667 

So in this scenario, if you invest Rs 10,000 in this fund, you will be allotted 56.83 units of the fund. Let's assume that the portfolio value of the Scheme increases from Rs 316.74 crores to Rs 400 crores on the next day. The NAV is then calculated as Rs 222.22 (Rs 400 crore divided by 1.80 crore units outstanding). As a result, your investment of Rs 10,000 in the Scheme would become worth Rs 12,628.76 (56.83 units x Rs 222.22 NAV). 

How is applicable NAV determined?

As per Association of Mutual Funds of India (AMFI), the Applicable Net Asset Value (NAV) for purchase transactions (including Switch-In transactions) under all mutual fund schemes (other than Liquid funds and Overnight Funds), irrespective of the amount of investment, shall be determined as follows:

NAV Image 1

Source: AMFI

Applicable NAV at time of redemption:

Redemption transaction can be applied on any business day at the official points of acceptance of transactions upto 3.00 pm. In such cases, the NAV of the same business day will apply, however, if the application is received after 3 pm, the NAV of the next day will be applied. Switches will be considered as redemption in the switch-out Scheme and purchase/subscription in the switch-in Scheme.

Factors that Impact NAV in Mutual Funds:

Gains and losses made in the portfolio:

A Mutual Fund's Net Asset Value (NAV) directly correlates to gains and losses made in the portfolio by the mutual fund scheme. In a very general term, If the investments underlying the fund generate profits, NAV will go up, while if markets face losses, it will decrease the NAV of the mutual fund.

Fund expenses: 

For managing the Scheme, AMC is charging expenses from the Scheme, which is also known as Total Expense Ratio(TER). TER is the total of ongoing fees and operating expenses charged to the Scheme, expressed as a percentage of the Scheme's daily net assets. These fees and expenses include Investment Management and Advisory Fees charged by the AMC, Registrar and Transfer Agents' fee, brokerage/commission, marketing and selling costs etc. and need to be within the SEBI specified limit for charging expenses in the Scheme.

The type of Mutual Fund:

 An investor can invest in mutual funds in two ways –through a regular plan or a direct plan. The regular plan generally refers to investment with the help of market intermediaries like financial advisors, mutual fund distributors or brokers. While a direct plan involves mutual fund investing directly with the mutual fund house. Suppose an investor goes through a regular plan; in that case, the cost of seeking services of brokers and management fees of the fund manager will be adjusted against the mutual fund NAV causing the NAV to be lower than NAV for an investor who has directly purchased the mutual fund scheme. 

Dividend pay-outs:

The Net Asset Value (NAV) of a Mutual Fund falls when it distributes dividends, and the extent of the reduction is proportional to the percentage of the Dividend paid. 

Investor entry or exit:

When investors sell their holdings and leave the fund when the NAV is high, it decreases the NAV for the remaining investors. At the same time, NAV can also fall if new investors buy into the fund as the number of mutual fund units increases.

How does Net Asset Value affect the performance of a Mutual Fund?

Investors often believe that NFOs are reasonably priced, as they are issued at the net asset value (NAV) of Rs 10. However, it is important to note that the NAV of a mutual fund unit is based on the value of the underlying securities and accumulated profits since the inception of the Scheme. As a result, two different mutual fund schemes may have the same portfolio of securities, but one may be available at par value (NAV of Rs 10), while the NAV of the other Scheme may exceed Rs 100. Despite the difference in NAV, the intrinsic value of both schemes will be the same. NAV only determines how many units get allotted for the investment amount.

Hence, relying solely on a mutual fund scheme's NAV as an indicator of its performance is not appropriate. Instead, investors should consider various factors, such as the Scheme's past performance, total expense ratio, and other relevant parameters, before investing.

What is the difference between Net Asset Value and Market Price?

The market price of a fund is calculated by the supply and demand of its shares during trading hours. On the other hand, the fund's net asset value (NAV) is the value of each share at the end of the trading day. It is calculated by adding the value of all assets in the fund, deducting the charges and other liabilities, and dividing by the number of outstanding shares.


The NAV meaning, significance and its calculation have been explained previously. However, it is important to remember that the importance of NAV lies not in the unit allotment but in the appreciation of the value of your investments. One can seek the help of financial advisors or go online for market and fund updates for informed investment decisions. 


Q1. Does mutual fund NAV change daily?

Mutual funds allocate the funds received from investors towards investments in different asset classes like equities and debt. Based on the valuation of assets in the portfolio of schemes, the Net Asset Value (NAV) of a particular scheme will also vary daily. 

Q2. What is the cut-off time for NAV?

If you want to purchase a fund at its current NAV, the application should be filed with Asset Management Companies (AMCs) or Registrar and Transfer Agents (RTAs) before the cut-off time of 3:00 pm on the day of trading. For liquid and overnight funds, the cut-off time for purchase if 1.30 pm and for redemption, it is 3 pm. 

Q3. When is NAV allotted in mutual funds?

The applicable NAV in respect of the purchase of units of the mutual fund scheme shall be subject to the realization & availability of the funds in the bank account of a mutual fund before the applicable cut-off timings for purchase transactions, irrespective of the amount of investment, under all mutual fund schemes.

Q4. What is SIP NAV?

 The concept is the same as 'NAV' for a scheme. The net asset value (NAV) for a Systematic Investment Plan (SIP) is calculated by subtracting the fund's liabilities from its total assets and dividing the result by the total number of shares.

These materials are not intended for distribution to or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions. Investors may consult their financial advisors and/or tax advisors before making any investment decision.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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© Kotak Mutual Fund.2023
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
© Kotak Mutual Fund.2023
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
© Kotak Mutual Fund.2023
Mutual fund investments are subject to market risks, read all scheme related documents carefully.