Net Asset Value (NAV)
Net Asset Value (NAV) is the per-unit value of a mutual fund scheme, calculated by subtracting liabilities from the market value of its assets and dividing by the number of units outstanding, published every business day.
What Is Net Asset Value (NAV)?
Net Asset Value (NAV) is the value of one unit of a mutual fund scheme. It tells you what each unit is worth based on the current market value of everything the scheme owns, after deducting what it owes.
When you invest, units are allotted to you at the applicable NAV. When you redeem, you receive the applicable NAV for each unit, minus any exit load. Every gain or loss in the portfolio, every bit of income earned and every rupee of expense charged shows up through changes in the NAV.
Under SEBI's rules, NAV must be calculated daily. SEBI's Master Circular lists the timeline for disclosing NAV as by 11 pm daily for schemes other than fund of funds, and by 10 am on the next business day (T+1) for fund of funds schemes. AMCs publish NAVs on their websites and on the AMFI website.
How Does It Work?
The basic formula is:
NAV = (Market value of assets − Liabilities) ÷ Number of units outstanding
- Value the assets. Shares, bonds and other holdings are valued at market prices or as per SEBI's valuation norms. Cash, accrued interest and receivables are added.
- Deduct liabilities. These include accrued expenses (part of the expense ratio charged daily), amounts payable for securities bought, and other dues.
- Divide by units. The result is the NAV per unit.
- Publish. The AMC discloses the NAV within SEBI's timelines.
- Apply to transactions. Whether you get today's or the next day's NAV depends on cut-off timings and, for purchases, when the money reaches the scheme. See Applicable NAV.
Each plan of a scheme has its own NAV. Direct plans have a separate, typically higher, NAV than regular plans because their expenses are lower. Growth and IDCW options also have different NAVs.
For a detailed walk-through of the computation, see Net Asset Value Calculation.
Practical Example
Illustrative figures only.
A scheme has the following position at the end of a day:
| Item | Amount |
|---|---|
| Market value of securities | ₹505 crore |
| Cash and receivables | ₹5 crore |
| Total assets | ₹510 crore |
| Liabilities (accrued expenses, payables) | ₹10 crore |
| Net assets | ₹500 crore |
| Units outstanding | 25 crore |
NAV = ₹500 crore ÷ 25 crore units = ₹20 per unit
If Kavya invests ₹50,000 at this NAV:
- Units allotted = ₹50,000 ÷ ₹20 = 2,500 units
If the NAV later rises to ₹22:
- Value = 2,500 × ₹22 = ₹55,000, a gain of ₹5,000 (10%).
Assumptions: no stamp duty, exit load or taxes considered.
Why Is It Important?
- Determines your units: The applicable NAV decides how many units you get for your money.
- Tracks your investment value: Current value = units held × latest NAV.
- Reflects costs: Expenses are deducted before NAV is published, so returns based on NAV are already net of the expense ratio.
- Basis for return calculations: Returns such as CAGR and XIRR are calculated using NAV movements.
Key Features or Components
- Daily calculation for all schemes.
- Separate NAVs for direct/regular plans and growth/IDCW options.
- Net of expenses: Daily expense accruals are deducted.
- Adjusted for IDCW: When an IDCW is paid, NAV falls by the payout amount (and statutory levy, if applicable).
- Face value vs NAV: Units are often issued at a face value (commonly ₹10) during a New Fund Offer; NAV moves from there.
Benefits and Limitations
Usefulness
- Gives a transparent, daily value for your holding.
- Makes transactions fair: all investors on a given day transact at the same NAV.
Limitations and pitfalls
- NAV alone says nothing about whether a scheme is good or bad.
- A single day's NAV movement is noise for long-term investors.
- For ETFs, the market price on the exchange can differ from NAV during the day.
Comparison With Related Concepts
| Concept | Meaning | Key difference | Practical implication |
|---|---|---|---|
| NAV | Per-unit value of a scheme | Calculated once a day from portfolio value | Price at which you buy/redeem open-ended fund units |
| Share price | Market price of a company's share | Set by buyers and sellers continuously | Can move above or below the company's book value |
| ETF market price | Exchange price of ETF units | Trades through the day; can deviate from NAV | Check bid-ask spread and premium/discount |
| AUM | Total assets managed | Total value, not per unit | Shows scheme size, not unit value |
How Does It Apply to Mutual Fund Investors?
- Purchase and redemption: Your transaction is processed at the applicable NAV based on cut-off time and fund realisation.
- SIPs: Each instalment buys units at that day's NAV, so you buy more units when NAV is low and fewer when it is high. See Rupee Cost Averaging.
- Statements: Your Consolidated Account Statement (CAS) shows units and current value based on NAV.
- Comparing plans: The NAV gap between direct and regular plans widens over time because of the expense difference.
Common Mistakes and Misconceptions
- "A low-NAV fund is cheaper and will grow faster." Correct: Returns depend on percentage change, not NAV level. With ₹10,000, you get 1,000 units at ₹10 or 100 units at ₹100; if both portfolios rise 10%, both investments become ₹11,000. Why it matters: Choosing by NAV level ignores what actually drives returns.
- "A high NAV means the fund is overvalued." Correct: A high NAV usually reflects a long track record of growth. Why it matters: NAV is not a valuation measure like a price-to-earnings ratio.
- "NAV falling after IDCW means I lost money." Correct: The payout comes from the scheme's value, so NAV drops by that amount. Why it matters: Total value (NAV plus payout) is unchanged before tax.
- "I will get the NAV shown when I place the order." Correct: You get the applicable NAV based on cut-off and fund receipt rules. Why it matters: Late orders or delayed payments can get a different NAV.
Important Terms to Know
- Net Asset Value Calculation: step-by-step NAV computation.
- Applicable NAV: the NAV at which your transaction is processed.
- Cut-Off Time and Applicable NAV: how timing affects your NAV.
- Allotment of Units: crediting units to your folio.
- Expense Ratio: costs deducted before NAV is declared.
- IDCW (Income Distribution cum Capital Withdrawal): payouts that reduce NAV.
Key Takeaways
- NAV is the per-unit value of a scheme: net assets divided by units outstanding.
- It is calculated daily and published within SEBI's timelines.
- Expenses are already deducted before NAV is declared.
- A low or high NAV does not make a fund cheap or expensive.
- Your transaction NAV depends on cut-off time and when funds reach the scheme.
Related Glossary Terms
- Net Asset Value Calculation
- Applicable NAV
- Mutual Fund Cut-Off Timings
- Assets Under Management (AUM)
- Direct Plan vs Regular Plan
- Growth Option vs IDCW Option
References
- AMFI: Net Asset Value
- AMFI: Cut-off Timings and Applicable NAV
- SEBI Master Circular for Mutual Funds (20 March 2026)
- SEBI (Mutual Funds) Regulations, 2026 (amended up to 7 July 2026)
Disclaimer
This article is for educational and informational purposes only. It is not personalised investment, tax or legal advice, and it does not recommend any specific scheme. Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Rules mentioned here can change, so check the latest SEBI and AMFI updates, and consider your financial goals, risk profile and investment horizon (or speak to a qualified professional) before making any decision.
Published by FynnChintan Finserv, an AMFI-registered mutual fund distributor. Beyond Numbers. Into Opportunities.
Want to keep learning? Explore the related terms above in the FynnChintan Financial Glossary, or read more about building a financial plan around your goals.
Frequently Asked Questions
Where can I check the NAV of a mutual fund scheme?
NAVs are published on the AMC's website and on the AMFI website. Your registrar statements and investment apps also display them. Always check that you are looking at the right plan (direct or regular) and option (growth or IDCW).
Why do direct and regular plans of the same scheme have different NAVs?
Both plans share the same portfolio, but the regular plan carries distribution commission, so its expense ratio is higher. Since expenses are deducted daily, the direct plan's NAV grows slightly faster and is usually higher.
Does NAV change during the day?
For regular open-ended mutual fund schemes, NAV is calculated once at the end of each business day. ETFs trade on stock exchanges, so their market price moves through the day, while their NAV is still computed daily.
Is NAV the same as the return of a fund?
No. NAV is a value per unit at a point in time. Return is the percentage change in NAV over a period, adjusted for any IDCW. A fund with NAV ₹15 can have better returns than one with NAV ₹300.
What happens to NAV when many investors redeem?
Redemptions reduce the number of units and the scheme's assets proportionately, so they do not directly change the NAV. However, heavy redemptions may force the fund to sell securities, and the prices realised can affect the NAV.
Why was my purchase not allotted at today's NAV?
For purchases, units are allotted based on the NAV of the day the money is realised in the scheme's bank account, provided the application and funds are received before the cut-off time. Delays in payment can shift your NAV to a later date.
This explanation is for general education only and is not investment advice. Mutual fund investments are subject to market risks; read all scheme-related documents carefully.