Mutual Funds To Allot Units Based On NAV Of Day When They Receive Funds
SEBI introduces procedural changes that affect the NAV based on which units are allotted to mutual fund investors.
Mutual fund investors will now be allotted units of schemes on the basis of the net asset value on the day the asset management company receives funds.
The change will be applicable from Jan. 1, 2021, according to a circular by the Securities and Exchange Board of India. The cut-off time remains 1 p.m.
The change is a small one and procedural, said Arvind Rao, certified financial planner and founder of Arvind Rao & Associates. These rules for allotment of units are already applicable for liquid and overnight funds, and for purchases of units worth more than Rs 2 lakh, he said.
Rao gave an illustration to explain: Assume an investor is buying units worth Rs 1 lakh in a Sensex Index Fund on Jan. 1, 2021. The order is placed through a brokerage account at 12:45 p.m., 15 minutes before the cutoff time.
Remember, the new rules do not change the cutoff time. That is, if an order for purchase is made after 1:00 p.m., the NAV of the next day is considered when allotting units.
According to the new rules, if a fund house receives the funds on the same day, the investor receives units based on the closing NAV of the day on which the order is placed. If the funds are received on the next day, the NAV of the next day is used to calculate allotment.