Depending on fluctuations in the stock industry, Mutual Fund (MF) investors would rush to the respective offices of Asset Management Companies (AMCs) or the offices of their Register and Transfer Agents (RTAs) to submit applications – for redemption at higher industry or for acquire at a low industry – just before the reduce off time to get the similar day NAV (Net Asset Value).
However, for investment (acquire) purposes in equity-oriented and debt Mutual Funds, the reduce off time becomes significantly less relevant as the units will only be allotted following the realisation of funds from February 1, 2021 even if applications are submitted just before the reduce off time.
Earlier, the rule of allotment of MF units following realisation of fund was applicable only on investments of Rs 2 lakh or above, though smaller sized investors used to get the similar day NAV by submitting the investment applications just before the reduce off time.
As per the Securities and Exchange Board of India’s (SEBI) directions, for the acquire of units of mutual fund schemes (except liquid and overnight schemes), closing NAV of the day shall be applicable on which the funds are readily available for utilisation irrespective of the size and time of receipt of such application.
However, the current provision on NAV applicability for liquid and overnight funds and reduce-off timings for all schemes shall stay unchanged.
So, from February 1, 2021 units will be allotted at the NAV applicable on the day of realisation of funds irrespective of the investment worth.
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Except liquid and overnight schemes, the reduce off time for acquire of all other funds is 3 p.m. and that of liquid and overnight schemes is 1.30 pm, though reduce off time for all MF schemes, which includes liquid and overnight schemes, is 3 p.m.
So, even if you submit an application for acquire of the units of a specific MF scheme on a day of low industry, you may well get the units at a larger NAV on a subsequent day at higher industry.
It’s practically specific that you will not get similar day NAV in case the payment is created by means of cheque for acquire MF units. Even if you make electronic payment, you may well have to do it effectively just before the reduce off time to make certain that the cash gets transferred to the fund account just before the reduce off time to get the similar day NAV.
But will it impact your investments by means of systematic investment program (SIP) as effectively?
According to Sirshendu Basu, Head – Products, IDFC Mutual Fund, acquire of units in case of investments by means of SIP will also be created at the NAV of the day on which the installment quantity will be realised. However, there is small possibility of cancellation of an SIP installment, as units are allotted if the fund quantity is realised inside 30 working days from the SIP date.
However, in case you are investing by means of a demat or other platform, fate of your SIP investment will rely on the transaction rule of that exchange/platform. For instance, if it is the rule of an exchange that the SIP installment quantity should be realised inside 5 days from the SIP date, your transaction request may well be canceled in case there is any more delay in availability of the fund at the exchange.