Q.What is NAV in a mutual fund and how is it calculated?
NAV stands for Net Asset Value and represents the per-unit price of a mutual fund scheme. It is calculated as (Total Market Value of Assets − Liabilities) ÷ Total Units Outstanding. SEBI mandates that all mutual funds publish NAV daily by 11 PM for equity schemes, per circular SEBI/HO/IMD/DF2/CIR/P/2019/14.
Q.Does a higher NAV mean a mutual fund is more expensive to invest in?
No, a higher NAV does not make a fund more expensive. If two funds hold identical portfolios, the one with a higher NAV delivers the same percentage return as the one with a lower NAV. The number of units you receive adjusts automatically, so rupee returns are identical given the same invested amount.
Q.What time is NAV declared for mutual funds in India?
SEBI mandates that equity and hybrid fund NAVs be published by 11 PM on the same business day. Debt fund NAVs must be published by 9 AM the following business day. This is governed by SEBI circular SEBI/HO/IMD/DF2/CIR/P/2019/14 dated January 22, 2019.
Q.How does the expense ratio affect the NAV of a mutual fund?
The Total Expense Ratio is deducted from the fund's assets daily before NAV is published, so investors never see a separate deduction. A 1% TER on a ₹10 lakh corpus silently erodes ₹10,000 in year one. Over 20 years, compounded TER drag can reduce final corpus by lakhs of rupees.
Q.Is NAV the same as the share price of a mutual fund?
NAV is functionally similar to a share price in that it represents the per-unit value of the fund. However, unlike a stock price that fluctuates intraday, NAV is calculated once per business day after market close using end-of-day portfolio valuations. You cannot trade a mutual fund at intraday prices.
Q.What happens to NAV when a mutual fund pays a dividend?
When a mutual fund declares a dividend (now called Income Distribution cum Capital Withdrawal or IDCW per SEBI's October 2020 directive), the NAV falls by exactly the dividend amount on the ex-date. No value is created — the money moves from the fund's NAV to the investor's bank account.
Q.Why do direct plan and regular plan of the same fund have different NAVs?
Direct plans have a lower TER because no distributor commission is paid. Since TER is deducted daily from the portfolio before NAV is struck, the direct plan NAV compounds at a higher rate over time. After 10+ years, the NAV difference between direct and regular plans of the same fund can be significant.
Q.How many units will I get if I invest ₹50,000 at a NAV of ₹250?
You will receive 200 units (₹50,000 ÷ ₹250). If the NAV rises to ₹300, your investment value becomes ₹60,000. The unit count stays fixed; only the NAV changes. This is how all mutual fund returns are generated — through NAV appreciation, not unit multiplication.