Topic 5 of 7~5 min read

How Fund Houses Calculate NAV Daily

Definition

Daily NAV calculation is the process by which mutual fund houses determine the per-unit value of each scheme at the end of every business day. The fund accountant collects the closing market prices of all securities held, adds accrued income (interest and dividends), includes cash and bank balances, subtracts all accrued expenses and liabilities, and divides the resulting net asset figure by the total outstanding units. SEBI requires AMCs to publish the NAV on their website and the AMFI website by 11:00 PM on every business day. For liquid and overnight funds, the NAV must be published by 11:00 PM as well, but the valuation cut-off rules differ.

In Simple Words

The NAV calculation process is like closing the books of a company every single day. Here is what happens inside a fund house between 3:30 PM (market close) and 11:00 PM (NAV publication deadline). Step 1: Market Close & Price Capture. At 3:30 PM, the NSE and BSE close. The fund accounting team captures the closing prices of every equity stock held in the portfolio. For debt securities, the team downloads the day's AMFI/CRISIL valuation matrices. Step 2: Corporate Action Adjustments. Any corporate actions — stock splits, bonus issues, dividends declared, rights issues — are adjusted. If a stock went ex-dividend that day, the dividend income is accrued. Step 3: Income Accrual. Interest accrued on bonds and debentures (calculated daily based on coupon rates) is added. Dividend income from stocks that went ex-dividend is recorded. Step 4: Expense Accrual. The day's share of TER is calculated (annual TER / 365) and deducted. Any other payables — management fees, custodian charges, registrar fees — are accrued. Step 5: Unit Capital Update. New subscriptions received that day (that qualify for the day's NAV based on cut-off timing) create new units. Redemptions processed cancel units. The total outstanding units are updated. Step 6: NAV Computation. Net Assets (Total Assets - Total Liabilities) divided by Updated Outstanding Units = the day's NAV. Step 7: Publication. The NAV is published on the AMC website and AMFI website by 11:00 PM.

Real-Life Scenario

Let us follow the NAV calculation of a hypothetical fund — "Trustner Bluechip Equity Fund" — on a specific business day, say March 12, 2025. Portfolio at previous day close (March 11): • 50 stocks in the portfolio, total equity value: ₹4,200 crores • Cash in bank: ₹80 crores • Accrued income carried forward: ₹5 crores • Outstanding units: 180 crore units • Previous day NAV: ₹23.75 Events on March 12: • Nifty rises 1.2%, portfolio equity value increases to ₹4,250 crores (not all stocks move equally) • One stock (HDFC Bank) goes ex-dividend: dividend accrual of ₹2 crores • New SIP subscriptions received before 3 PM cut-off: ₹15 crores (creating 63.16 lakh new units at today's NAV) • Daily TER expense: ₹4,300 crores x 1.80% / 365 = ₹0.212 crores NAV Calculation: Total Assets = ₹4,250 + ₹80 + ₹5 + ₹2 + ₹15 = ₹4,352 crores Total Liabilities = ₹0.212 crores (day's TER) + ₹1.5 crores (other accrued expenses) = ₹1.712 crores Net Assets = ₹4,352 - ₹1.712 = ₹4,350.288 crores Outstanding Units = 180 crore + 0.6316 crore = 180.6316 crore units NAV = ₹4,350.288 / 180.6316 = ₹24.08 The fund accountant, Sneha, publishes this NAV on the AMC website by 9:30 PM — well before the 11 PM SEBI deadline.

Key Points to Remember

NAV is calculated at the end of every business day (weekdays when stock markets are open) and must be published by 11:00 PM on the AMFI and AMC websites

The process begins after market close (3:30 PM for equity) with price capture from NSE/BSE for equity securities and AMFI/CRISIL matrices for debt securities

Accrued income is added: interest on bonds calculated daily based on coupon rate, dividends from stocks that went ex-dividend

Accrued expenses are subtracted: daily TER (annual TER / 365), management fees, custodian fees, registrar fees, audit fees — all prorated daily

Corporate actions (bonus, split, rights, merger) are adjusted on the ex-date — this can cause significant NAV changes independent of market movement

Unit capital is updated daily: new subscriptions (that meet cut-off timing) create new units; redemptions cancel units

The fund accountant is responsible for NAV computation, reconciliation, and timely publication — this is a critical back-office function

On days when the stock market is closed (weekends, exchange holidays), no new NAV is calculated — the previous business day's NAV continues to apply

Frequently Asked Questions

Test Your Knowledge

3 questions to check your understanding

Question 1 of 3Score: 0/0

SEBI mandates that AMCs must publish the NAV of their schemes by what time on business days?

Summary Notes

NAV is calculated at end of every business day using closing market prices and must be published by 11:00 PM on AMFI and AMC websites

The calculation involves: capturing security prices, adding accrued income, subtracting daily expenses (TER), adjusting for corporate actions, and dividing net assets by total outstanding units

New subscriptions and redemptions do NOT change NAV — assets and units change proportionally, keeping the per-unit value unchanged for existing investors

The fund accountant is the key person responsible for accurate and timely NAV computation — errors must be corrected and affected investors compensated

No NAV is computed on stock exchange holidays — the previous business day's NAV continues to apply for reference