Net Asset Value (NAV)
NAV is the per-unit price of a mutual fund scheme on a given trading day. It represents the market value of the fund's portfolio, net of liabilities, divided across all outstanding units. NAV is the primary reference price at which mutual fund units are bought and redeemed.
Calculation
NAV = (Total Assets − Total Liabilities) / Number of Outstanding Units
Total Assets include market value of all securities, accrued income, and receivables. Total Liabilities include accrued expenses, management fees, and payables. SEBI mandates daily NAV publication for all open-ended schemes, typically by 11 PM IST.
NAV vs. Stock Price
Unlike a stock price reflecting supply-demand dynamics, NAV is a calculated value from the underlying portfolio. A high NAV does not imply an expensive fund, nor does a low NAV imply a cheap one. Two funds with identical portfolios but different NAVs generate identical percentage returns.
Growth vs. IDCW Plans
- •Growth: Profits retained and reinvested; NAV increases over time.
- •IDCW (formerly Dividend): Profits periodically distributed; NAV falls by the distribution amount on the ex-date.
NAV Cut-Off Times
For equity funds, transactions before 3 PM receive same-day NAV; after 3 PM, next business day NAV. Liquid and overnight funds have different cut-off times.
Expense Ratio Effect
The annual fund fee is deducted from assets daily on a pro-rata basis, directly reducing NAV. A fund with a higher expense ratio has relatively lower NAV growth over time versus an identical lower-cost fund.