Net asset value is the most quoted number about any mutual fund and one of the most misread. It is the value of one unit of the fund — not a price that tells you whether the fund is cheap or expensive.
How NAV is calculated
For illustration, a fund holds securities worth ₹100 crore, owes ₹1 crore in liabilities and has 9.9 crore units outstanding. Its NAV is (₹100 crore − ₹1 crore) ÷ 9.9 crore units = ₹10.
Why a low NAV is not cheap
Take two funds that hold identical portfolios and both rise 10%:
| Fund A | Fund B | |
|---|---|---|
| NAV today | ₹10 | ₹100 |
| Units for ₹10,000 | 1,000 | 100 |
| NAV after a 10% rise | ₹11 | ₹110 |
| Value of your holding | ₹11,000 | ₹11,000 |
The outcome is identical. A high NAV usually just means a fund has existed longer or grown more. The same logic applies to new fund offers priced at ₹10: the starting NAV says nothing about value or future returns.
What moves NAV
- Prices of the holdings — the main driver.
- Income earned, such as interest and dividends received by the fund.
- Expenses, deducted daily from the fund's assets.
- IDCW payouts, which reduce NAV by the amount paid out.
Flows in and out do not move NAV: new money creates new units at the NAV, and redemptions cancel units.
Which NAV you get
The applicable NAV depends on when the fund receives both your application and your money, relative to cut-off times set by SEBI. Rules differ for some categories, such as liquid and overnight funds. Investing through an intermediary adds processing time, so the date you click "invest" may not be the date your NAV is struck.
Direct and regular NAVs
The direct plan of a scheme has a higher NAV than its regular plan over time, because it carries a lower expense ratio. See direct vs regular plans.
To see how units and NAV add up over time, try the SIP Lab.