NAV (Net Asset Value) is simply the per-unit price of a mutual fund, calculated as (Total Assets − Total Liabilities) ÷ Number of Units Outstanding. A lower NAV does NOT mean a fund is cheaper or a better deal. A ₹10,000 investment in a fund with NAV ₹10 buys 1,000 units. The same ₹10,000 in a fund with an NAV of ₹500 buys 20 units. If both funds deliver the same 10% return, both investments will grow to exactly ₹11,000. NAV level is irrelevant to your returns — only the percentage change in NAV over time matters.
Mutual Fund NAV — The Biggest Myth Busted
Every NFO (New Fund Offer) in India launches at a NAV of ₹10. This applies to every single AMC, category, or strategy. For decades, this ₹10 starting price has quietly misled investors into thinking they are getting a ‘cheap’ fund, when in fact the NAV level has absolutely nothing to do with whether a fund is a good or bad investment.
This belief is the single most persistent myth in Indian mutual fund investing, and it has been actively exploited by distributors for years to push new fund launches over established, proven schemes. This guide explains exactly what NAV is, how it is calculated, why the “low NAV is cheap” belief is mathematically false, and what you should actually look at instead.
What Is NAV and How Is It Calculated?
The Net Asset Value (NAV) is the price per unit of a mutual fund scheme. It is the value of all that the fund owns, stocks, bonds, cash, and accrued dividends, less what it is owing, divided by the total number of units held by all investors in that scheme.
The NAV formula
NAV = (Total Assets − Total Liabilities) ÷ Total Number of Outstanding Units Total Assets = market value of all securities (stocks and bonds) + cash + accrued dividends + receivables. Total Liabilities = Fund expenses, accrued charges, and any payables. For example, suppose a fund has total assets of ₹950 crore, has no major liabilities, and has 10 crore units outstanding. Then NAV will be ₹95 per unit (₹950 crore ÷ 10 crore units).
When is NAV calculated?
- For open-ended mutual funds (which are the large majority in India), the NAV is calculated and published once a day, at the end of every business day.
- NAV reflects the closing market value of the fund’s holdings on that specific day; it is not a real-time, intraday price like a stock.
- For closed-ended funds, NAV may be calculated weekly or monthly, though most retail mutual funds in India are open-ended.
- All AMCs are required to publish the daily NAV on the AMFI website (amfiindia.com) by a SEBI-mandated cut-off time each business day.
Why NAV changes every day
Each day, the fund marks its underlying portfolio, which includes stocks, bonds, and other holdings, to market. to market each day. The fund’s NAV and the total value of assets fluctuate with stock and bond prices. If fund holdings go up, NAV goes up. If they don’t, NAV will decrease. The number of units outstanding only changes when investors buy (new units issued) or sell (units redeemed and cancelled) and does not fluctuate with market movement.
The Biggest NAV Myth: Why Lower NAV Does NOT Mean Cheaper
Here is the misconception in its most common form: “This NFO is only ₹10 per unit, so I can buy more units than that other fund at ₹500 per unit — it must be a better deal.” This reasoning works for stocks trading below their fair value, but it does not apply to mutual funds at all. Here’s the proof.
Worked example: ₹10 NFO vs ₹500 existing fund
Investor A invests ₹100,000 in a brand-new NFO priced at NAV ₹10. Investor B invests the same ₹100,000 in an established fund with a current NAV of ₹500 (this fund has been running for 10 years and has grown from its original ₹10 NAV through compounding).
| Investor A (NFO at ₹10 NAV) | Investor B (Existing fund at ₹500 NAV) | |
| Amount invested | ₹100,000 | ₹100,000 |
| NAV at purchase | ₹10 | ₹500 |
| Units allotted | 10,000 units (100,000 ÷ 10) | 200 units (100,000 ÷ 500) |
| If both funds deliver 10% return… | NAV rises to ₹11 | NAV rises to ₹550 |
| New investment value | 10,000 × ₹11 = ₹110,000 | 200 × ₹550 = ₹110,000 |
| Final gain | ₹10,000 (10%) | ₹10,000 (10%) |
The result
Both investors earned the exact same ₹10,000 gain on the exact same ₹100,000 investment, even though Investor A held 50 times more units than Investor B. The number of units you hold is irrelevant. What matters entirely is the percentage change in NAV from your purchase date to your sale date — and that percentage change depends solely on how well the fund’s underlying portfolio performs, not on the starting NAV level.
Why this myth persists
This misconception is intuitive because it mirrors how stock investing sometimes works: a stock trading below its fair value can genuinely be a bargain. But a mutual fund’s NAV is not a market-determined price reflecting supply and demand for the fund itself; it is a direct, mechanical reflection of the value of the underlying portfolio, recalculated fresh every single day. There is no concept of a mutual fund unit being ‘overvalued’ or ‘undervalued’ relative to its NAV; the NAV IS the fair value, by definition, every single day.
A high NAV is often considered a positive indicator
A fund with an NAV of ₹500 after 10 years did not become ‘expensive’—it compounded successfully. NAV naturally rises over a fund’s lifetime as its underlying investments grow in value. An older fund with a high NAV and a strong track record is frequently a safer, more proven choice than a brand-new NFO with no performance history at all, priced arbitrarily at ₹10 simply because it just launched.
NAV vs Stock Price: A Critical Difference
Understanding why the NAV myth is false requires understanding how fundamentally different a mutual fund unit is from a company share.
| Parameter | Stock Price | Mutual Fund NAV |
| Determined by | Buyer and seller demand on an exchange (can deviate from fair value) | Mechanical formula: portfolio value ÷ units outstanding (always equals fair value) |
| Can be overvalued or undervalued? | Yes, market sentiment can push price above or below intrinsic value | No, NAV is recalculated daily to exactly match the portfolio’s actual value |
| Updated | Continuously during market hours (real-time) | Once daily, after market close |
| A ‘low price’ signal? | Can sometimes indicate a bargain, depending on fundamentals | Never indicates a bargain, purely reflects fund age and historical compounding |
| What drives long-term returns? | Underlying business growth + market re-rating | Underlying portfolio growth only (no re-rating possible) |
Does NAV Growth Equal Fund Performance?
The answer is partly yes, but there is a key difference for IDCW (dividend) plans. The increase in NAV for growth plan funds over time is a true measure of fund performance since all gains are reinvested and never distributed. In case of IDCW (Income Distribution cum Capital Withdrawal, previously Dividend) plans, the NAV growth understates actual performance, as periodic payouts reduce the NAV every time they are paid.
Growth plan vs. IDCW plan: how payouts affect NAV
If a fund declares an IDCW of ₹5 per unit when NAV is ₹100, the ex-dividend NAV immediately drops to ₹95. The unit holder receives ₹5 in cash (or reinvested units), so no value is actually lost — but the NAV figure alone no longer reflects the fund’s full historical performance. This is why comparing the NAV of a growth plan to that of an IDCW plan within the same underlying scheme can be misleading: the growth plan’s NAV will always be significantly higher simply because it has not distributed any cash. Most long-term investors should prefer the growth plan for cleaner compounding and better tax efficiency.
How Many Units Will You Get? Worked Examples
| Investment Amount | Fund NAV | Units Allotted (Investment ÷ NAV) |
| ₹5,000 | ₹10 (NFO) | 500 units |
| ₹5,000 | ₹100 | 50 units |
| ₹5,000 | ₹500 | 10 units |
| ₹10,000 | ₹55 | 181.81 units |
| ₹25,000 | ₹243.50 | 102.67 units |
Mutual funds (unlike many stocks) allow fractional unit allotment, so your investment amount is divided cleanly by the NAV regardless of whether it results in a whole number of units. This is also why SIP investing works seamlessly with any fixed rupee amount — you simply receive however many units (including fractional units) your contribution buys at that day’s NAV.
NAV Cut-Off Timing: When Does Your Transaction Get Today’s NAV?
SEBI has laid down cutoff timings for transactions in mutual funds to decide which NAV will be applicable to your purchase or redemption. However, an additional rule has been in effect since February 1, 2021. This rule states that the applicable NAV is based on when the funds are actually realized and available in the mutual fund’s bank account before the cut-off time and not just when you place your order.
| Transaction type | Cut-off time | NAV applied |
| Equity fund purchase (any amount) | 3:00 PM | Same-day NAV, only if funds are realised in the AMC’s account before cut-off; otherwise next business day’s NAV |
| Equity fund redemption | 3:00 PM | Same-day NAV if submitted before cut-off; otherwise, the next business day |
| Liquid fund purchase | 1:30 PM | Same-day NAV if funds are realised before cut-off |
| Liquid fund redemption | 3:00 PM | Same-day NAV if submitted before cut-off |
The post-2021 realisation rule
Effective from February 1, 2021, as per SEBI circular SEBI/HO/IMD/DF2/CIR/P/2020/175, the applicable NAV for purchase will be based on actual realization and availability of funds in the mutual fund’s bank account before the cut-off time and not just when you initiated the payment. Therefore, a UPI or net banking payment settles immediately, which generally provides you same-day NAV. However, a payment method that delayed settlement will often lead to next business day NAV instead, even if you placed the order before the cut-off.
Real Case Study: The April 2026 NAV Correction
A genuinely useful, very recent illustration of how NAV movement works in practice: in April 2026, a US tariff-related shock triggered a sharp market correction. The Nifty 50 fell approximately 11.3%, and the Sensex fell approximately 11.5% in a single month, and the NAVs of equity mutual funds across the industry dropped proportionally, with some mid- and small-cap schemes falling 11–25%.
What this meant for different types of investors
- For existing lump-sum investors: The loss was a paper loss; the value of their holdings fell, though no actual loss was realized unless they sold.
- For SIP investors: This was an opportunity. The same fixed monthly SIP amount bought 12% to 25% more units than it would have at the pre-correction NAV — a textbook demonstration of rupee cost averaging in action.
The lesson from April 2026
Investors who panicked and stopped their SIPs during the correction missed out on accumulating units at significantly lower NAVs — exactly the units that would benefit most from the subsequent recovery. Investors who continued their SIPs (or increased them) bought meaningfully more units during the dip. This is the practical, real-world proof of why a falling NAV during a SIP is not disastrous news; it is the mechanism through which rupee cost averaging works.
When Is NAV Truly Significant?
The NAV level itself is irrelevant to your returns. But the change in NAV, and a few specific situations, are genuinely important to understand:
- Tracking percentage growth: The percentage change in NAV from your purchase date to today is exactly your return (before accounting for any IDCW payouts received separately).
- Redemption value calculation: When you redeem, your proceeds = number of units held × NAV on the redemption date (minus any applicable exit load). Knowing your units and the current NAV tells you your exact redemption value at any time.
- SIP rupee cost averaging: Each SIP installment buys units at that day’s NAV; a lower NAV means more units purchased for the same rupee amount, which is the entire mechanism behind rupee cost averaging.
- Comparing growth vs. IDCW NAV for the same fund: It is useful to understand why they differ (due to distributed payouts), not to judge one as ‘better priced’ than the other.
Where to Check Mutual Fund NAV Daily
- The daily NAV reports of all registered schemes are available at the AMFI India website (amfiindia.com).
- On the AMC’s own website, every fund house publishes its schemes’ NAVs daily.
- Investment platforms, Groww, Zerodha Coin, INDmoney, Kuvera, and similar apps, display the current NAV for every fund.
- Mutual fund research portals such as Value Research Online and Morningstar India also provide current NAV information.
- The BSE Star Mutual Fund and NSE NMF II platforms also provide current NAV information.
- Financial newspapers, Business Standard, Economic Times, and Mint publish daily NAV tables.
Final Thoughts
Focus on quality and managerial skill rather than on the NAV. NAV does not determine future returns. The starting NAV of Rs 10 in NFOs is quite arbitrary, and one should rather go for established funds with proven track records. “If you switch funds when the NAV is down, you lock in losses unless there is fundamental deterioration. In the long run, IDCW plans are not better than growth plans because of tax implications on distributions. Missed SIP deadlines can impact the relevant NAV. Finally, the NAVs of two different schemes are futile because they would have been launched on different dates, and money would have been compounded for different periods.
FAQ
Does a high NAV mean a fund is overvalued?
No. Unlike a stock, a mutual fund’s NAV can’t be overvalued or undervalued. It is a precise, mechanical calculation of the actual value of the fund's portfolio divided by the outstanding units, and it is calculated anew every day. A high NAV typically just means the fund has existed for a long time and has compounded successfully, which is often a positive signal, not a warning sign.
How is NAV different from the price I pay to buy a unit?
For most funds (no entry load is charged in India since 2009), the NAV is precisely the price you pay per unit, with the number of units allotted calculated as your investment amount divided by that day's applicable NAV. Some platforms may show a slightly different effective price if any one-time charges apply, but in standard direct or regular plan purchases, NAV is the transaction price.
Why did my fund's NAV drop even though I didn't sell anything?
NAV reflects the daily market value of the fund's underlying holdings. The NAV decreases in accordance with the daily market value fluctuations of the stocks or bonds within the portfolio. If you bought, sold, or did nothing, this decline automatically happens. This decline is a paper loss only; you do not realize an actual loss unless you redeem your units at the lower NAV.
Should I worry if my SIP fund's NAV keeps falling?
Not at all. If you have a long-term view (5 years or more) and the fund's principles are still strong, then it's fine. When the NAV declines during your SIP term, each payment will buy you more units at a lower price. This is rupee cost averaging at work for you, not against you. A recent example of this market decline occurred in April 2026. Those SIP investors who stayed invested in the market when it went down were then able to see many more units do well during the partial recovery.
