NAV stands for Net Asset Value — it represents the per-unit price of a mutual fund scheme. Think of NAV as the “share price” of a mutual fund. When you invest ₹10,000 in a mutual fund with NAV of ₹50, you receive 200 units. When the NAV rises to ₹60, your 200 units are worth ₹12,000. Understanding NAV is essential for every mutual fund investor in India.
How NAV Is Calculated
The formula is straightforward: NAV = (Total Assets – Total Liabilities) ÷ Total Number of Outstanding Units. Total assets include the market value of all stocks, bonds, and other securities the fund holds, plus any accrued income and receivables. Total liabilities include fund management fees, administrative expenses, and any pending payouts. AMCs (Asset Management Companies) calculate NAV at the end of each business day after the market closes.
For example, if a fund holds securities worth ₹500 crore, has liabilities of ₹5 crore, and has 10 crore units outstanding, the NAV would be (500 – 5) ÷ 10 = ₹49.50 per unit. This NAV is published daily by AMFI (Association of Mutual Funds in India) and is available on every investment platform.
Does a Lower NAV Mean a Cheaper Fund?
This is the biggest misconception among Indian mutual fund investors. A fund with NAV ₹15 is NOT cheaper or a better deal than a fund with NAV ₹500. NAV simply reflects the historical accumulation of returns since the fund’s inception. A fund launched 20 years ago with strong performance will naturally have a high NAV, while a newly launched fund starts with a low NAV (usually ₹10).
What matters is future return percentage, not the NAV itself. If Fund A (NAV ₹500) and Fund B (NAV ₹15) both deliver 12% returns next year, a ₹10,000 investment in either fund will become ₹11,200. Your returns depend entirely on percentage growth, not the starting NAV. Never choose a fund based on low NAV — it is a meaningless criterion for fund selection.
NAV and SIP Investments
When you invest through SIP, your monthly investment buys units at whatever the NAV is on your SIP date. During market dips, the NAV falls and you automatically buy more units for the same amount. During market rallies, NAV rises and you buy fewer units. This rupee cost averaging is the key advantage of SIP investing — you don’t need to track NAV daily or try to time the market.
Use the SIP calculator to see how regular investments at varying NAV levels compound over time into significant wealth.
NAV Cut-Off Timings in India
SEBI has set specific cut-off times that determine which day’s NAV applies to your investment. For equity and debt funds (up to ₹2 lakh), if your payment is received before 3:00 PM on a business day, you get that day’s NAV. After 3:00 PM, you get the next business day’s NAV. For investments above ₹2 lakh in liquid and overnight funds, the cut-off is 1:30 PM. For redemptions, the cut-off is 3:00 PM for equity funds and 3:00 PM for debt funds.
This means if you want to invest at today’s NAV, ensure your online payment is completed well before 3:00 PM. SIP investments are automatically processed within cut-off times by the platform, so you don’t need to worry about timing for SIPs.
NAV vs Market Price (for ETFs)
Exchange Traded Funds (ETFs) are similar to mutual funds but trade on the stock exchange like shares. ETFs have both a NAV (calculated end-of-day) and a real-time market price that fluctuates during trading hours. The market price can deviate slightly from NAV — trading at a premium (above NAV) or discount (below NAV). For popular index fund ETFs like Nifty BeES, this deviation is usually minimal, but for less liquid ETFs, the premium/discount can be significant. Always check if an ETF’s market price is close to its NAV before buying.
Frequently Asked Questions
Should I invest when NAV is low?
Trying to time investments based on NAV is generally futile for long-term investors. A “low” NAV during a market correction might fall further, and a “high” NAV during a rally might continue rising. Research consistently shows that time in the market beats timing the market. The best approach is to invest regularly through SIP regardless of NAV levels and let rupee cost averaging work for you over years.
Why does NAV go down even when the market is up?
A fund’s NAV can decline even on a green market day for several reasons: the fund’s specific stock holdings may have underperformed the broader market, the fund may have paid a dividend (which reduces NAV by the dividend amount), or the fund’s expense ratio deduction may have been processed. If a fund declares a ₹5 dividend, the NAV drops by ₹5 on the ex-dividend date — your total value remains the same because you receive the ₹5 as cash.
How is NAV different from the share price of a stock?
A stock’s share price is determined by supply and demand on the exchange and can fluctuate second by second during trading hours. NAV is calculated once daily after market close based on the actual value of the fund’s holdings. Stock prices can deviate significantly from intrinsic value due to market sentiment, while NAV always reflects the true value of the fund’s underlying assets. This makes mutual funds inherently more “fairly priced” than individual stocks.
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- What Is SIP? Systematic Investment Plan Guide
- What Is an Index Fund?
- What Is a Mutual Fund?
- SIP Calculator
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About the Author
Mithun Srivastava is the founder of MithunSrivastava.com, a free stock market education platform for Indian investors. With a passion for making finance accessible to everyone, Mithun creates practical guides, calculators, and glossary resources to help beginners start their investing journey with confidence.