Investing NAV mutual fund valuation

NAV computation: how mutual fund NAV is calculated

From WebNotes, a public knowledge base. Last updated 18 May 2026. Reading time ~9 min.

NAV computation is the daily process by which mutual fund AMCs in India calculate the per-unit Net Asset Value of each scheme they manage. The computation is regulated by the SEBI (Mutual Funds) Regulations 1996 and accompanying SEBI valuation circulars, with detailed methodology disclosed in each scheme’s Scheme Information Document (SID). The NAV computation produces the price at which units are subscribed and redeemed each business day, making it one of the most operationally critical mutual fund processes.

For the per-unit NAV formula and conceptual context, see the parent article. This article focuses on the computational mechanics: the valuation methodology applied to each asset class within a scheme, the daily timing of the computation, the publication channels and timelines, and the SEBI-driven amendments since 2020 that have shaped current practice.

The NAV formula

NAV = (Total Assets - Total Liabilities) / Number of units outstanding

Where:

Total Assets: aggregate market value of investments, plus receivables and other assets.
Total Liabilities: aggregate expenses payable, distribution charges, audit fees, custodian fees, trustee fees and other obligations.
Number of units outstanding: total units issued, adjusted for the business day’s net subscriptions and redemptions.

Valuation methodology by asset class

Listed equity holdings

Indian listed equity holdings are valued at the closing market price on the principal stock exchange (NSE or BSE ) on the valuation day. If the security did not trade on the valuation day, the previous day’s closing price is used, subject to SEBI’s stale-price guidance.

Unlisted equity holdings

Unlisted equity (including pre-IPO and convertible holdings) is valued by approved valuers using methodology prescribed in SEBI circulars. The valuation typically uses comparable-multiple methods, transaction-based valuation, or discounted cash flow analysis depending on the security’s nature and disclosure availability.

Debt securities

Debt instruments held by mutual fund schemes are valued through SEBI-approved Valuation Agencies (CRISIL Valuation Agencies, ICRA Valuation Agencies, and CARE Valuation Agencies). These agencies publish methodology-based mark-to-market valuations for the universe of corporate bonds, government securities, money-market instruments and other debt holdings.

The use of valuation-agency prices was strengthened post the Franklin Templeton April 2020 winding-up , which exposed the risks of relying on stale or matrix-based debt valuations during liquidity stress.

Money market and ultra-short instruments

For instruments with maturity up to 60 days, schemes use the amortisation method (straight-line accrual of the spread to maturity). The amortisation method simplifies valuation for very-short-tenor instruments where mark-to-market prices are typically close to amortised values.

Foreign securities

Mutual fund schemes with overseas exposure value foreign holdings at the closing market price on the principal exchange where the security trades, converted to Indian rupees at the RBI reference rate or the exchange’s published rate. The timing of foreign-market closure (typically after Indian market close) means schemes with foreign exposure publish NAV by the next business day.

Government securities

Government bonds (G-Secs) are valued through the Fixed Income Money Market and Derivatives Association (FIMMDA) published rates, with valuation-agency adjustments as applicable.

Liabilities side

TER accrual

The principal recurring liability is the Total Expense Ratio (TER) charged to the scheme. TER is expressed as an annual percentage; the daily accrual is approximately TER divided by 365.

For a scheme with 1.5 per cent TER and Rs 1,000 crore AUM:

Daily TER charge ≈ Rs 1,000 crore × 1.5% / 365 = approximately Rs 41 lakh per day.

This daily charge reduces the scheme’s NAV by the corresponding per-unit amount.

Other liabilities

Audit fees: pro-rata daily accrual based on annual contract.
Custodian fees: typically a few basis points of AUM per year, accrued daily.
Trustee fees: annual fixed amount or AUM-based percentage, accrued daily.
Specific fund-level fees: registrar fees, transaction charges, etc.

Unit-outstanding adjustment

Same-day adjustments

For the NAV computation on a given business day:

Subscriptions received and cleared: New units allocated at the applicable NAV are added to the units outstanding.
Redemptions executed: Redeemed units are removed from the units outstanding.
Switches: Treated as redemptions (from source) plus subscriptions (into target) for unit-count purposes.

The applicable NAV rules under SEBI’s cut-off framework determine which day’s subscriptions and redemptions count for which day’s NAV.

Reconciliation with RTA records

The Registrar and Transfer Agent (RTA) (CAMS or KFin Technologies ) maintains the unit-holder records. The AMC reconciles the daily unit count with the RTA records before publishing NAV.

Daily NAV cycle

A typical daily NAV cycle for an equity scheme:

3:30 pm: Market close. Closing prices available for Indian equity.
4:00-6:00 pm: AMC’s mid-office team gathers closing prices for all holdings.
6:00-8:00 pm: Debt valuations received from valuation agencies.
8:00-10:00 pm: NAV computation performed and reviewed by mid-office and finance teams.
10:00 pm-11:00 pm: NAV approval by AMC management, publication to RTA.
11:00 pm: NAV published on AMC website and forwarded to AMFI for consolidated publication.

For schemes with overseas exposure that needs US-market closing prices (NYSE closes at 1:30-2:00 am IST), NAV publication may extend to T+1 day.

SEBI February 2021 NAV applicability amendment

SEBI’s February 2021 amendment to applicable-NAV rules tightened the requirement that funds must be actually realised in the AMC’s collection account (not just received as instruction) before the 3:00 pm cut-off for same-day NAV.

This change shifted some practical implications for large bank-mode subscriptions where bank-settlement delays might push fund realisation past cut-off, deferring NAV applicability by one day. Direct-plan investments routed via UPI or instant-settlement are generally not affected.

SEBI master circular on valuation

The SEBI master circular on mutual funds (last updated 2023-2024) consolidates the valuation framework across:

Indian listed equity valuation principles.
Unlisted equity valuation methodology.
Debt-security valuation through valuation agencies.
Stress-testing requirements for valuation in distressed market conditions.
Disclosure requirements for valuation methodology in SID/KIM.

External references

References

SEBI (Mutual Funds) Regulations 1996 and SEBI master circular on mutual funds.
SEBI valuation circulars and accompanying methodology guidance.
SEBI February 2021 amendment on applicable-NAV cut-off rules.
AMFI Best Practice Guidelines on NAV computation and publication.

Reviewed and published by

WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

Last reviewed: 18 May 2026
Conflicts of interest: WebNotes is independent. No relationship with any broker, registrar or bank named in this article.