What is NAV? — Calculation & Significance
Net Asset Value (NAV) is the per-unit value of a mutual fund scheme. This lesson explains the formula, what counts as assets and liabilities, when NAV is worked out and disclosed, and why a high or low NAV says nothing about value.
What NAV is
A mutual fund scheme pools investors' money and issues units against it. NAV is the value of one unit: the market value of the scheme's assets minus its liabilities, divided by the number of units outstanding.
Assets include the market value of the securities held, income accrued on them (such as interest on bonds and dividends), and cash and bank balances. Liabilities include scheme expenses accrued but not yet paid, such as management, custodian, registrar and audit fees. Trail commission payable to distributors is an expense as well: while accrued and unpaid it is a liability, not an asset.
When it is worked out and where it is used
Most schemes work out their NAV for each business day and disclose it by 11 PM the same day. Liquid and overnight funds work it out for every calendar day.
Units are bought at the applicable NAV and redeemed at the applicable NAV less any exit load. Which day's NAV applies depends on the cut-off time and on when the money reaches the fund. On a purchase, stamp duty of 0.005% is deducted first, so units allotted = (amount − stamp duty) ÷ NAV.
Why the level of NAV means nothing
Units in a new fund offer are usually priced at ₹10 each; the price is stated in the offer document. From then on the NAV moves with the value of the portfolio, so a scheme whose portfolio has grown over many years shows a higher NAV than one launched recently.
A lower NAV buys more units and a higher NAV fewer, but the value of an investment is units multiplied by NAV either way. A low NAV does not make a scheme cheap, and a high NAV does not make it expensive. What counts is the percentage change in NAV.
NAV can fall as well as rise
Because the portfolio is valued at market prices, the percentage change in NAV can be negative as well as positive. When the prices of the shares or bonds a scheme holds fall, its NAV falls with them. NAV states what a unit is worth on that day; it promises nothing about later days.
Rules at a glance
₹1,00,000 in a low-NAV and a high-NAV fund (illustrative)
Assume Fund A has an NAV of ₹20 and Fund B an NAV of ₹400, and both hold similar large-cap shares. Ignoring stamp duty, ₹1,00,000 buys 5,000 units of A or 250 units of B.
If both portfolios rise by 10%, the NAVs become ₹22 and ₹440, and the investment is worth 5,000 × ₹22 = ₹1,10,000 in A and 250 × ₹440 = ₹1,10,000 in B. If both fall by 10% instead, each is worth ₹90,000. The number of units differs; the outcome does not.
Working out a NAV (assumed figures)
- Assume a scheme holds securities with a market value of ₹790 crore, income accrued of ₹6 crore and cash and bank balances of ₹16 crore. Total assets = ₹790 crore + ₹6 crore + ₹16 crore = ₹812 crore.
- Its liabilities, mainly expenses accrued but not yet paid, are ₹12 crore. Net assets = ₹812 crore − ₹12 crore = ₹800 crore.
- Units outstanding are 40 crore. NAV = ₹800 crore ÷ 40 crore = ₹20.00 per unit.
- Dividing the ₹812 crore of assets by 40 crore units without deducting the liabilities would give ₹20.30, which overstates the NAV.
Result. The NAV is ₹20.00 per unit. Liabilities are deducted from assets before dividing by the units outstanding.
Key points
- NAV = (market value of assets − liabilities) ÷ units outstanding.
- Assets are the securities at market value, income accrued and cash; liabilities include expenses accrued but not yet paid.
- Most schemes work out NAV for every business day and disclose it by 11 PM the same day; liquid and overnight funds do so for every calendar day.
- Units are bought at the applicable NAV and redeemed at the applicable NAV less any exit load.
- A lower NAV does not make a scheme cheaper, and a higher NAV does not make it expensive.
- What counts is the percentage change in NAV, which can be negative as well as positive.
Common misunderstandings
- A low NAV is not a bargain and a high NAV is not a sign of an expensive scheme: the same percentage change gives the same result on the same amount.
- NAV is not assets divided by units: liabilities are deducted first.
- A ₹10 unit in a new fund offer is not cheaper than a unit of an existing scheme: ₹10 is only the usual starting price.
Questions people ask
Is trail commission part of a scheme's assets?
No. It is an expense of the scheme; while accrued and unpaid it is a liability. Assets are the securities at market value, income accrued and cash and bank balances.
At what price are units redeemed?
At the applicable NAV less any exit load. The cut-off time decides which day's NAV applies.
Why are fewer units allotted than the amount divided by the NAV?
Because stamp duty of 0.005% is deducted from the amount first: units allotted = (amount − stamp duty) ÷ NAV.
What this lesson relies on
- SEBI Master Circular for Mutual Funds (20 March 2026) — Chapters 9 and 10, on NAV, valuation and pricing of units
- Indian Stamp Act, 1899 — stamp duty on mutual fund purchases (from 1 July 2020)
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.