NAV, TER and Pricing in Segregated Portfolios

Not necessarily. A NAV of ₹10 usually indicates the fund is in its NFO stage or recently launched. However, NAV alone does not indicate risk — the risk depends on the underlying portfolio (equity, debt, hybrid), the fund manager's strategy, and market conditions. Always evaluate the scheme information document (SID), portfolio composition, and fund house track record before investing.

NAV changes daily because the market value of the securities held by the fund changes every trading day. Equity prices fluctuate based on market forces, debt securities are revalued based on yield movements, and accrued income and expenses change. Since SEBI requires end-of-day NAV calculation, these changes are reflected in the updated NAV published after market hours.

No, NAV cannot go below zero. Since mutual funds invest in regulated securities traded on exchanges, even in extreme market crashes, asset values do not go to zero (unlike individual stocks of bankrupt companies). The lowest theoretical NAV would be close to zero if all holdings became worthless, but this has never happened in the history of Indian mutual funds.

No. For regular mutual funds, investors transact at NAV. But for ETFs (Exchange Traded Funds), there are two prices: the NAV (calculated end-of-day based on holdings) and the market price (the price at which ETF units trade on the exchange during market hours). The market price can be at a premium or discount to NAV depending on demand and supply.

Yes. When a mutual fund declares and pays a dividend (now called IDCW — Income Distribution cum Capital Withdrawal), the NAV drops by the dividend amount on the ex-dividend date. For example, if NAV is ₹50 and the fund declares ₹3 per unit as IDCW, the NAV will drop to approximately ₹47 on the record date. This is not a loss — the investor receives the ₹3 separately.

If an equity security is not traded on a particular day, it is valued at the last available closing price on the exchange. If it has not traded for more than 30 days, it is classified as a non-traded/thinly traded security and must be valued using fair valuation methods approved by the AMC's valuation committee. For debt securities, AMFI/CRISIL matrices provide daily valuations regardless of whether the security traded that day.

Before MTM norms, some debt funds were valuing securities at "amortized cost" — essentially showing a smooth, straight-line return regardless of market conditions. This masked the true risk. When a credit event occurred (like IL&FS default in 2018), the sudden shift to market-based valuation caused sharp NAV drops. SEBI mandated MTM to ensure daily NAV transparency and prevent funds from hiding losses until a crisis erupted.

Yes. From October 2019, SEBI mandated that liquid funds must value all securities with maturity above 30 days using MTM valuation. Earlier, liquid funds used amortization for securities up to 60 days maturity, which masked short-term volatility. Now, even liquid fund NAVs can show minor daily fluctuations due to MTM.