Every time you invest in a mutual fund — whether via SIP or lump sum — your investment is processed at the fund’s NAV. But what exactly is NAV, and does a lower NAV mean a cheaper or better fund?
This guide answers all of that clearly.
NAV Full Form
NAV stands for Net Asset Value.
| Letter | Stands For |
|---|---|
| N | Net |
| A | Asset |
| V | Value |
What is NAV in Mutual Funds?
NAV is the per-unit market value of a mutual fund scheme. It tells you how much one unit of that mutual fund is worth on any given day.
When you invest ₹10,000 in a mutual fund with a NAV of ₹50, you receive 200 units (₹10,000 ÷ ₹50 = 200 units). If the NAV rises to ₹60, your 200 units are now worth ₹12,000 — a gain of ₹2,000.
NAV is declared at the end of every trading day by the fund house, after markets close.
NAV Formula
NAV = (Total Assets of the Fund − Total Liabilities) / Total Number of Units Outstanding
Where:
- Total Assets = current market value of all stocks, bonds, and cash held by the fund
- Total Liabilities = expenses payable, management fees, etc.
- Units Outstanding = total units held by all investors in that fund
How is NAV Calculated — Example
Let’s say a mutual fund holds the following:
| Item | Value |
|---|---|
| Equity holdings (market value) | ₹500 crore |
| Cash and equivalents | ₹50 crore |
| Total Assets | ₹550 crore |
| Total Liabilities (fees payable) | ₹5 crore |
| Net Assets | ₹545 crore |
| Total Units Outstanding | 10 crore units |
| NAV | ₹54.50 per unit |
So if you invest ₹10,000 in this fund at NAV ₹54.50, you receive 183.48 units (₹10,000 ÷ ₹54.50).
Is a Lower NAV Better?
This is one of the biggest misconceptions among new mutual fund investors in India.
No — a lower NAV does not mean a cheaper or better fund.
Here’s why: NAV is simply the current price per unit. A fund with NAV ₹10 and a fund with NAV ₹500 can give you the exact same returns if their underlying portfolios grow at the same rate.
Example:
| Fund A | Fund B | |
|---|---|---|
| NAV today | ₹10 | ₹500 |
| You invest | ₹10,000 | ₹10,000 |
| Units received | 1,000 | 20 |
| NAV after 1 year (+20%) | ₹12 | ₹600 |
| Portfolio value | ₹12,000 | ₹12,000 |
| Return | 20% | 20% |
Both funds gave identical returns. The lower NAV of Fund A didn’t make it better or cheaper — you simply got more units, but each unit was worth less.
What actually matters: the fund’s performance (return history), its portfolio quality, and its expense ratio — not the NAV number.
How NAV Changes Daily
NAV changes every business day because the market value of the fund’s underlying securities changes. If the stocks held by the fund go up, NAV goes up. If they fall, NAV falls.
- NAV is declared once a day, after market close (typically by 11 PM)
- Equity fund NAV is based on closing prices of NSE/BSE
- Debt fund NAV changes more gradually since bonds are less volatile
- Liquid fund NAV changes daily with interest accrual
NAV and SIP — How They Work Together
When you invest via SIP, your monthly instalment buys units at that day’s NAV:
- When NAV is low (market down) → you get more units
- When NAV is high (market up) → you get fewer units
This automatic averaging is called Rupee Cost Averaging — one of the biggest advantages of SIP investing. Over time, your average purchase NAV tends to be lower than the average NAV during the period, which benefits long-term investors.
Types of NAV
| Type | Meaning |
|---|---|
| Regular Plan NAV | NAV of the regular (distributor) plan — includes distributor commission in expense ratio |
| Direct Plan NAV | NAV of the direct plan — lower expense ratio, so NAV grows faster over time |
| Growth NAV | Dividends are reinvested — NAV grows higher over time |
| IDCW NAV | Dividends are paid out — NAV is reset after each payout |
Direct plan NAV will always be higher than regular plan NAV for the same fund, because direct plans have a lower expense ratio — meaning more of your money stays invested and compounds.
Where to Check NAV
- AMFI website (amfiindia.com) — official daily NAV for all mutual funds
- Fund house websites — HDFC MF, SBI MF, Nippon, etc.
- Apps: Groww, Zerodha Coin, Paytm Money, ET Money
- MF Central (mfcentral.com) — official consolidated NAV portal
Key Takeaways
- NAV full form = Net Asset Value
- It is the per-unit market value of a mutual fund scheme, declared daily after market close
- Formula: NAV = (Total Assets − Liabilities) ÷ Units Outstanding
- A lower NAV does not mean a better or cheaper fund — what matters is portfolio quality and returns
- Direct plan NAV is always higher than regular plan NAV for the same fund
- In a SIP, you benefit from Rupee Cost Averaging — buying more units when NAV is low
Frequently Asked Questions (FAQ)
Q: What is NAV full form in mutual funds?
NAV stands for Net Asset Value. It is the per-unit price of a mutual fund scheme, calculated as (Total Assets − Liabilities) divided by the total number of units outstanding. NAV is declared at the end of every trading day.
Q: Is lower NAV better in mutual funds?
No. A lower NAV does not mean a fund is cheaper or better. NAV simply reflects the current value of one unit. A fund with NAV ₹10 and a fund with NAV ₹500 will give you identical returns if their portfolios grow at the same rate. Focus on the fund’s return history and expense ratio, not NAV.
Q: How is NAV calculated?
NAV = (Total market value of assets − Total liabilities) ÷ Total units outstanding. The total assets include all securities (stocks, bonds, cash) held by the fund at their current market value.
Q: Does NAV change daily?
Yes. NAV changes every business day because the market value of the fund’s underlying securities changes with market movements. Equity fund NAVs are declared by 11 PM after NSE/BSE close. Debt fund NAVs change more gradually.
Q: What is the difference between NAV and share price?
A share price is the market price of one share of a listed company, determined by supply and demand on the stock exchange. NAV is the calculated per-unit value of a mutual fund based on its underlying portfolio — it is not traded on an exchange but declared by the fund house daily.
Q: Why is direct plan NAV higher than regular plan NAV?
Direct plans have a lower expense ratio since no distributor commission is paid. This means more of your money stays invested and compounds, causing the direct plan NAV to grow faster than the regular plan NAV over time — even though they hold identical portfolios.
Q: What happens to NAV when I redeem my mutual fund units?
When you redeem (sell) your units, you receive the NAV declared on the day of redemption multiplied by the number of units you redeem. If you submit a redemption request before the cut-off time (typically 3 PM for equity funds), you get that day’s NAV; otherwise you get the next business day’s NAV.
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