What is NAV?
When you invest in a mutual fund, you are not buying shares of a company directly. Instead, you are buying units of a fund. And the price of each unit on any given day is called the NAV — Net Asset Value.
Think of NAV as the "price tag" of one unit of a mutual fund. If the NAV of a fund is Rs. 50, you pay Rs. 50 for each unit you buy. If you invest Rs. 5,000, you get 100 units (5,000 ÷ 50).
NAV stands for Net Asset Value. It reflects the current market value of everything the fund holds — divided equally among all units.
How is NAV Calculated?
Every mutual fund holds a portfolio of assets — equity shares, bonds, cash, or a mix. The total value of all these assets on any day is called the Assets Under Management (AUM).
The fund also has some expenses — the fund manager's fees, administrative costs, and so on. These are deducted.
The formula is simple:
NAV = (Total Value of Fund's Assets − Liabilities) ÷ Total Number of Units Outstanding
Example: Suppose a fund holds stocks and bonds worth Rs. 100 crore in total. Its liabilities (expenses payable) are Rs. 1 crore. And there are 99 lakh units in existence.
NAV = (100 Cr − 1 Cr) ÷ 99 lakh = Rs. 100 per unit
In India, SEBI requires mutual funds to calculate and publish their NAV at the end of every business day. So when you check a fund's NAV in the evening, it reflects that day's closing market prices.
Key Terms Related to NAV
AUM — Assets Under Management
AUM is the total market value of all investments that a mutual fund manages. A larger AUM generally means more investors trust the fund. However, a very large AUM in a small-cap fund can sometimes make it harder for the fund manager to buy and sell stocks without moving prices.
Units
When you invest in a mutual fund, you receive units. The number of units you get depends on your investment amount and the NAV on that day. Units are like your "share" of the fund's total portfolio.
Applicable NAV
The NAV used for your transaction is called the applicable NAV. For most equity funds, if your money is received and processed before 3 PM on a business day, you get that day's NAV. After 3 PM, you get the next business day's NAV. For liquid funds and overnight funds, the cut-off rules are different and stricter — always check your fund's scheme information document.
Expense Ratio
Every mutual fund deducts a small annual fee to cover fund management and operational costs. This is called the expense ratio and is expressed as a percentage of AUM. It is already factored into the NAV — the NAV you see is after this deduction. A lower expense ratio is better for you as an investor.
Exit Load
Some funds charge a small fee if you redeem units before a certain period — typically 1% if you exit within 1 year for equity funds. This is called the exit load and is deducted from your redemption amount, not from NAV directly.
Does a Low NAV Mean a Cheaper or Better Fund?
This is one of the most common misconceptions among new investors. A low NAV does not mean a fund is cheap or undervalued.
Consider two funds that both started 10 years ago with an NAV of Rs. 10:
- Fund A has grown its NAV to Rs. 200 — because its portfolio has done very well over 10 years.
- Fund B has an NAV of Rs. 15 — because it has barely grown.
If you invest Rs. 10,000 in Fund A, you get 50 units at Rs. 200 each. In Fund B, you get 667 units at Rs. 15 each. But what actually matters is how much those units will be worth in the future — and that depends entirely on the quality of the fund's portfolio and management, not the NAV number.
A higher NAV simply means the fund has compounded wealth over a longer period. It is a sign of a fund that has performed well — not a fund that is expensive to buy.
How Does NAV Change?
NAV changes every day because the market value of the fund's holdings changes every day. If the stocks in the fund go up, the NAV goes up. If they fall, the NAV falls. This is completely normal and expected.
When you redeem your investment, you receive the NAV on the applicable date multiplied by your number of units. So your actual return depends on the difference between the NAV when you invested and the NAV when you redeemed.
Key Things to Remember
- NAV is just the price of one unit — it tells you what each unit is worth today, not whether the fund is good or bad.
- Low NAV ≠ better value — focus on the fund's past performance, consistency, and expense ratio, not the NAV number.
- NAV is published daily — you can check it on AMFI's website (amfiindia.com) or the fund house's website every evening.
- NAV already accounts for expenses — the expense ratio is deducted before NAV is calculated, so what you see is what you get.
- Returns are driven by portfolio performance — what the fund manager buys and sells determines NAV growth, not the starting NAV level.
- Fractional units are possible — mutual funds allow fractional units (up to 3 decimal places), so you can invest any amount regardless of NAV.
Frequently Asked Questions
Can NAV fall to zero?
In theory, NAV can fall very low if the fund's entire portfolio loses value — but it cannot become negative. In practice, a well-diversified mutual fund rarely falls to near-zero because it holds many different assets. This is why diversification matters.
Is a higher NAV fund better than a lower NAV fund?
Not necessarily. A higher NAV just means the fund has been around longer or has performed better in the past. It does not guarantee better future returns. Always compare funds on consistent returns, risk, expense ratio, and fund manager track record — not NAV level.
What happens to NAV when a fund declares a dividend (IDCW)?
When a fund declares an Income Distribution cum Capital Withdrawal (IDCW — formerly called dividend), the payout comes from the fund's assets. This reduces the NAV by the amount distributed. For example, if NAV is Rs. 30 and the fund pays Rs. 2 as IDCW, the NAV drops to Rs. 28 after distribution. No value is created or destroyed — it is simply transferred from the fund to your bank account.
Where can I check NAV daily?
You can check daily NAV on the AMFI website at amfiindia.com, directly on the fund house's website, or through your broker or investment app. NAV is typically published by 9–10 PM on every business day.
Start Investing with Confidence
Understanding NAV — and what it does and does not tell you — is one of the most important steps in becoming a confident mutual fund investor. Once you know that NAV is simply a price and not a measure of value or quality, you can focus on what truly matters: picking the right fund for your goals and staying invested for the long term.
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