Which date NAV is applicable for purchase of mutual funds?

To answer the question very simply, from 1st February 2021, whenever you invest in any mutual fund scheme, then you will get the NAV of the day when the invested amount actually reaches AMC’s bank account, and not the day you invest at your end based on cut off timing rules.

So even though SEBI has defined the cut-off timings for NAV applicability (as detailed in this post – latest mutual fund cut off timing rules in India), the concept of cut off time becomes less relevant as the scheme units will only be allotted to the investor after the realization of funds at the AMC level.

Earlier, this rule of allotment of units only after realization of the fund was applicable only on investments above Rs 2 lakh while the smaller investors (who invested amounts below Rs 2 lakh) used to get the same-day NAV if purchase application were submitted before the cut off time. But from 1st February 2021, the ‘giving NAV only after fund realization’ rule became applicable to all MF purchase transactions irrespective of the investment amount.

This also means that you may 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 wrote about this in detail here – You may not get MF units at your investment day’s NAV

So now you know which date’s NAV will be applicable for the units allotted to your mutual fund purchases.

AMFI on its website has listed a few useful FAQs in this regard (link), which I am reproducing here n parts for wider reach:

  • WHAT IS THE NEW RULE ON APPLICABLE NAV? As per SEBI circular no. SEBI/HO/IMD/DF2/CIR/P/2020/175 dated September 17, 2020 read with circular no. SEBI/HO/IMD/DF2/CIR/P/2020/253 dated December 31, 2020, effective from February 1, 2021, the applicable NAV in respect of purchase of units of mutual fund scheme shall be subject to realization & availability of the funds in the bank account of the mutual fund before the applicable cut off timings for purchase transactions, irrespective of the amount of investment, under ALL mutual fund schemes. (The above rule is already applicable for purchase transactions under Liquid funds and Overnight Funds).
  • WHEN WILL THE NEW RULE COME INTO EFFECT? The revised rule is applicable for all purchase transactions received from 1st Feb. 2021.
  • TO WHICH TRANSACTIONS IS THE NAV BASED ON REALIZATION OF FUNDS APPLICABLE? (i) All purchase transactions – whether Initial purchase or additional purchase of units; whether lump-sum investment or under Systematic Investment Plan (SIP); irrespective of the amount of investment. (ii) Purchase of units through Inter-scheme switching of investments, including switch transactions under Systematic Transfer Plan (STP) or trigger events irrespective of the amount of investment.
  • IS THERE ANY CHANGE IN CUT-OFF TIMINGS FOR PURCHASE TRANSACTIONS? There is no change in the existing cut off timings purchase transactions. (It remains the same as detailed here).

The site also offers a couple of illustrations (for Lumpsum vs SIP investments in mutual funds) to clarify things:

  • Lump Sum purchase transaction: For say, Rs 50,000 received (time stamped) before cut-off time of 3.00 p.m. on Thursday 11-Feb-2021. If the funds are received in the mutual fund’s account before cut-off time of 3.00 p.m. on 11th February 2021, the investor will be allotted closing NAV of 11-Feb-2021. However, if the funds are received in the mutual fund’s bank account at say 5.00 p.m. on 10th February 2021, i.e., after the cut-off time of 3.00 p.m., the allotment of units will be done at the NAV of Friday 12-Feb-2021. However, if the funds are received in the mutual fund’s bank account at say 4.00 p.m. on Friday 12-Feb-2021, the units will be allotted at the closing NAV of Monday 15-Feb-2021 (Feb. 13 & 14 being Saturday & Sunday i.e., non-business days) In short, the units are allotted at the NAV of the business day on which the funds are received into the mutual fund account before the applicable cut-off time.
  • SIP Transaction: Assuming an investor has signed up for (say) SIP Rs 5000 to be debited on 10th of every month. Hitherto, the investor would have been allotted SIP units at the NAV for 10th the month (assuming the same is a Business day) irrespective of the date on which the money was received/credited to the Mutual Fund’s bank account. As per the new Rule, the investor would be allotted the SIP units at the NAV for 10th only if the money is received/credited to the Mutual Fund’s bank account before 3.00 p.m. on 10th. Else, the SIP units will be allotted units at the NAV of the next business day on which funds are received before the cut-off time. In view of the above, investors are encouraged to avail electronic payment modes for remittance of funds to the mutual fund bank account to facilitate speedy fund transfers.

So that is the how SEBI has changed the NAV Applicability Rule for mutual fund purchases. To conclude and to summarize, from now on whenever you invest in a mutual fund scheme, you will get the NAV of the day when funds actually reach AMC.

1 comment

  1. What about a switch? Shouldn’t the date of purchase of target fund be same day of request or, same days as current fund is debited?

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