Do you know what is the Cut off time of Mutual Funds in India (2022)? And do you know that cut off timing for debt funds are different from cut off timing for equity funds?
Generally speaking, cut off time determines whether you will get NAV (Net Asset Value) of the same day or the next when buying or selling mutual fund units.
So cut off time is applicable at the time of purchase as well as sale of mutual funds.
Cut-Off Timing for Mutual Funds in India (2022)
There are different cut-off timings for overnight funds, liquid funds, other debt funds and equity funds.
As per the last update by SEBI (October 2020), the cut off timings are base on the category or type of mutual funds and is as follows:
- Overnight Funds – Cut off timing is 1:30 p.m.
- Liquid Funds – Cut off timing is 1:30 p.m.
- Other Debt Funds – Cut off timing is 3 p.m.
- Conservative Hybrid Funds – Cut off timing is 3 p.m.
- Equity Funds – Cut off timing is 3 p.m.
Note – Do have a look at different mutual fund categories.
Let’s take a few examples to understand this:
- If a purchase order for overnight funds and liquid funds is placed before 1.30 pm, then NAV of the previous day will be applicable. While for orders placed after 1:30 pm, NAV of the same day will be applicable.
- For purchase of remaining fund varieties (like other debt fund categories, equity funds or hybrid funds), if the order is placed before 3 pm, it will consider the same day’s NAV. And for orders placed after 3 pm, the next day’s NAV will be applicable.
So if you miss the cut-off time, then there will be a delay of 1 day in the applicability of NAV. That is, it is the deadline before which if you invest, you will get a particular day’s NAV. And if you invest after the deadline, then you will get another day’s NAV.
In my view, for the vast majority of MF investors, this change in cut-off timing didn’t have any impact as such and made very little difference. But for those who invest large sums for short periods of time, this will have some impact. Similar to the impact that the graded exit loads of liquid funds has for large investors.
In April 2020, SEBI had reduced the cut-off timings of all mutual fund categories from 3 pm to 1 pm and that of liquid and overnight funds from 1:30 pm to 12.30 pm. As of October/November 2020, the timings have been restored back to pre-Covid times for mutual fund transactions.
There is another aspect to this for transactions of value more than Rs 2 lakh. As of latest SEBI circular, the transfer of money to the AMC bank account should be completed by 3 p.m. to qualify for the same day’s NAV.
So that is about the cut off timing of mutual funds in India (2022).
Related reading: Which date NAV is applicable for purchase of mutual funds?
Due to a new rule change you may now not get MF units at the desired NAV even if you apply before the cut off time as the units (and NAV) will only be allotted after the realization of funds, i.e. once the AMC receives the money in its bank account. I wrote about this in detail here – You may not get MF units at your investment day’s NAV