What Is Net Asset Value (NAV)?
- 7 min read
According to the Association of Mutual Funds in India (AMFI), the average assets under management (AAUM) of the Indian Mutual Fund Industry for July 2025 reached INR 77,00,420 crore. This figure shows that Indian investors are actively investing in mutual funds to grow their capital and secure their future.
If you are looking for mutual funds to diversify your portfolio, then your first step is to understand NAV.
Read this blog to know more about the NAV meaning, its calculation, formula, its importance, and more.
What is NAV in a Mutual Fund?
NAV is the market value per share of a particular mutual fund. You can buy or sell a mutual fund scheme based on the NAV. A net asset value is determined daily, which is calculated at the end of the day.
Mostly, the unit price of mutual funds starts with INR 10 during their new fund offering (NFO). As the assets under the funds grow, the NAV also increases. Hence, a popular mutual fund always has a higher NAV.
How to Calculate Net Asset Value?
Net Asset Value Formula
You can calculate an NAV by subtracting the liabilities from the total asset value. Then you need to divide it by the total number of outstanding shares.
Net Value of an Asset = (Total Assets – Total Liabilities)/ Total Outstanding Shares
Here, total assets are the cumulative market value of a fund. This includes securities like stocks, cash, and any accrued income.
The total liabilities refer to short- and long-term financial obligations of a mutual fund, like outstanding payments, accrued expenses, and other fees.
The total outstanding shares are the total number of units issued by a mutual fund.
Calculation of NAV With Example
Let us understand the formula of NAV with an example. For instance, you are going to calculate the NAV of fund A, and you have the following details:
- Total Assets of fund A = INR 10,00,000
- Total Liabilities of fund A = INR 3,00,000
- Total outstanding units = 2,00,000
As per the formula, the NAV of fund A will be:
INR (10,00,000 – 3,00,000 / 2,00,000) = INR 3.5
Importance of NAV in Mutual Funds
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Price Determination
A net asset valuation has been crucial in setting the price at which the units are bought or sold. The transaction of mutual funds happens at the end of the day. This ensures all the transactions of a day are executed at the same price.
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Transparency
An NAV ensures transparency by representing the current market value of a fund. This gives a clear picture of what an investor’s share is worth at any time, helping them to make informed choices.
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Adjustments
An NAV also helps to understand how dividends and capital gains affect a fund. While distributing these earnings among shareholders, the NAV per share decreases by the amount distributed for each share.
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Factors Influencing NAV
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Market Volatility
If the asset prices of a fund rise, it will also increase its NAV. Simultaneously, if it falls, the NAV will also fall. The reason behind this is that NAV is weighed against the weighted average market value of the fund’s assets.
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Expense Ratio
Expense ratio is a fee charged by the mutual fund house to manage investors’ holdings. If this ratio increases, the NAV of a fund becomes lower.
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Dividends and Capital Gains
If a mutual fund distributes the dividends to sell assets, the manager’s performance will fall. This is a consequence of the fees charged by these funds, which are deducted from the fund’s value.
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Exit Load
Not every mutual fund scheme, but some of them charge an exit load if an investor sells their units. This charge is also deducted from the NAV. It can decrease the value of equities, which can affect an investor’s investments.
Distinctions Between NAV and Market Price
Many people consider the NAV to be the same as the market price of an asset, whereas they are different. The table below highlights the key differences between NAV and market price:
| Parameters | NAV | Market price |
| Price determination | Based on the valuation of all the securities in the fund’s portfolio. | Based on supply and demand dynamics. |
| Fluctuation | NAV fluctuates at the close of the business day. | Fluctuates throughout the day. |
| Impact of transaction costs like brokerage fees | Not reflected on NAV. | Reflect on the market price. |
What Effect Does Investment Timing Have on NAV?
In its recent update, the Securities and Exchange Board of India has revised mutual fund cut-off timings to improve transparency in the NAV calculation process. The current cut-off time for this is 3 PM.
Following this regulation, NAV is assigned according to the realisation of a mutual fund’s bank account before the cut-off time. A mutual fund must receive a purchase application and corresponding funds before 3 PM. If they are credited after 3 PM, the NAV of the following business day will be applied.
Role of NAV in Fund Performance
NAV plays a crucial role in measuring the performance of a mutual fund. An increasing NAV shows that the value of the fund’s assets is increasing, which results in capital gains for investors. On the other hand, a decreasing NAV indicates poor performance of the fund.
However, the NAV of an asset indicates how the underlying assets have performed in the last few years. Hence, investors should not make it a deciding factor for choosing mutual funds.
Final Thought
Understanding the NAV of a mutual fund is crucial before you invest in it. NAV allows you to know how many units you get allotted for your investments.
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Frequently Asked Questions
1. Which is more beneficial, higher or lower?
A higher NAV cannot be more beneficial than a lower one. NAV does not determine the performance of a mutual fund. It provides the reference point for the per-share value of a mutual fund.
2. What impact does NAV have on returns on my mutual funds?
An NAV is an indicator of the performance of a mutual fund. It only shows the per-unit value of a fund’s assets and does not affect your fund’s returns.
3. Are all mutual fund categories subject to the same NAV?
No, each mutual fund category is not subject to the same NAV. Each of them has different characteristics, which influence its NAV.
4. Where can I find a mutual fund’s most recent NAV?
You can find the most recent NAV of a mutual fund on the mutual fund house websites, your online brokerage application, and the AMFI website.
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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
