Mutual Fund Investment: Small investors to get same day NAV for some more time

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The cutoff time for purchase and redemption of equity and debt funds (except liquid funds) is 3 pm, while the cutoff time for purchase of liquid funds is 2 pm.

The directive of Securities and Exchange Board of India (SEBI) that – in case of purchase of units of mutual fund schemes (except liquid and overnight schemes), the closing NAV of the day shall be applicable on which the funds are available for utilisation irrespective of the size and time of receipt of such application – has made the small investors a worried lot.

This is because the criteria of applying NAV on the day on which the funds are available for utilisation is currently applicable on investments of Rs 2 lakh or more, while smaller investors investing lesser amount get the same day NAV on the date of application, provided the applications are submitted before the cutoff time.

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The cutoff time for purchase and redemption of equity and debt funds (except liquid funds) is 3 pm, while the cutoff time for purchase of liquid funds is 2 pm.

On submitting an application within the cutoff time for purchase of units of MF schemes for less than Rs 2 lakh, an investor gets the units allotted at the NAV of the date of application, while the investors investing Rs 2 lakh or more gets the NAV of the date on which the money is realised.

To bring parity among both small (investing less than Rs 2 lakh) and big investors (investing Rs 2 lakh or more), market regulator SEBI had earlier directed that from January 1, 2021, units will be allotted to all investors, irrespective of size of investment, only after the realisation of funds or at the NAV of the day on which funds become available for utilisation.

Applicability of NAV upon realisation of funds to make it difficult to invest in MF at a desired price

However, giving relief to small investors for some more time, the market regulator has postponed the implementation of NAV applicability for Mutual Fund transactions by one month to February 1, 2021.

So, till February 1, 2021, small investors, investing less than Rs 2 lakh, may take advantage of availing the same day NAV by submitting application forms before the cutoff time on a day of market fall.

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