Understanding NAV
NAV stands for Net Asset Value — it's the price of one unit of a mutual fund. Here's how it works.
Key takeaways
NAV — Net Asset Value — is the price of one unit of a mutual fund on any given day. It's the single number that tells you how much your investment is worth right now.
How NAV is calculated
NAV = (Total market value of all holdings − liabilities) ÷ total number of units outstanding. If a fund owns stocks and bonds worth ₹100 crore, has expenses of ₹1 crore, and has issued 10 crore units — the NAV is ₹9.90. Every business day after 3:30 PM (when Indian markets close), the fund calculates the current market value of all its holdings and publishes a fresh NAV.
The most common NAV myth
Many investors think a fund with NAV of ₹10 is cheaper than one with NAV of ₹500, and therefore a better buy. This is completely wrong. NAV just reflects how long a fund has been around and how much it has grown. A fund with NAV ₹500 that was ₹250 five years ago has doubled your money. A fund with NAV ₹10 that started at ₹10 three years ago has returned nothing. Always look at returns, not the NAV number itself.
NAV and your returns
If you bought 1,000 units at NAV of ₹50, you invested ₹50,000. If the NAV is now ₹75, your investment is worth ₹75,000 — a 50% return. This is how you track your mutual fund returns. The percentage change in NAV from your purchase date to today is your return, before accounting for dividends or capital gains distributions.
When is NAV applied to your transaction?
For equity funds — if you submit a purchase or redemption request before 3 PM on a business day, the same day's NAV is applied. After 3 PM, the next business day's NAV applies. For liquid and overnight funds, the rules are slightly different. This matters when you're doing large transactions — timing by even one day can affect the price you pay.