Understanding the NAV of Mutual Funds in India

Mutual funds are popular investment vehicles that allow individuals to pool their money together and invest in a diversified portfolio of securities. One of the key concepts associated with mutual funds is Net Asset Value (NAV). In this article, we will explore the significance of NAV in the Indian mutual fund industry and understand how it is calculated.

Introduction to Net Asset Value (NAV)

Net Asset Value (NAV) represents the per-unit value of a mutual fund scheme. It is calculated by dividing the total net assets of the scheme by the total number of units outstanding. NAV reflects the underlying value of the mutual fund scheme and helps investors evaluate the performance of their investments.

Calculation of NAV

The NAV of a mutual fund is calculated based on the following formula:

NAV = (Total Assets - Total Liabilities) / Number of Units Outstanding

The total assets include the market value of securities held by the mutual fund, cash, and other assets. Total liabilities consist of expenses, payable dividends, and other outstanding liabilities. The resulting value is then divided by the number of units held by investors to determine the NAV.

Significance of NAV

The NAV of a mutual fund scheme holds significant importance for investors. Here’s why:

Valuation of Investments: NAV helps investors determine the current value of their investments in the mutual fund scheme.

Buying and Selling: NAV plays a crucial role when buying or selling mutual fund units. Investors can purchase units at the NAV prevailing on the date of the transaction.

Performance Evaluation: NAV provides a basis for evaluating the performance of a mutual fund scheme over time. By comparing the NAV at different points, investors can assess the growth or decline in their investment.

Factors Influencing NAV

Several factors influence the NAV of a mutual fund scheme:

Market Movements: Changes in the market value of securities held by the mutual fund impact the NAV. If the value of underlying assets increases, the NAV tends to rise, and vice versa.

Expenses and Fees: Mutual funds incur various expenses, such as management fees, administrative costs, and distribution charges. These expenses are deducted from the scheme’s assets, which affects the NAV.

Inflows and Outflows: When investors subscribe to or redeem units of a mutual fund scheme, it affects the total number of units outstanding, subsequently impacting the NAV.

Dividends and Distributions: Dividends or distributions paid to investors reduce the scheme’s net assets, leading to a decline in the NAV.

Impact of NAV on Mutual Fund Investments

The NAV of a mutual fund has a direct impact on investors’ investments in several ways:

Unit Price: The NAV determines the unit price at which investors buy or sell mutual fund units. Higher NAV means higher unit prices and vice versa.

Capital Gains/Losses: Investors realize capital gains or losses when they sell their mutual fund units. The difference between the purchase NAV and the sale NAV determines the extent of the capital gains or losses.

Returns Calculation: The growth or decline in NAV helps calculate the returns earned by investors on their mutual fund investments.

Monitoring NAV

Investors should regularly monitor the NAV of their mutual fund schemes. Here are a few key points to consider:

Historical Performance: Analyze the NAV trend over time to assess the performance of the mutual fund scheme.

Comparative Analysis: Compare the NAV of the scheme with its benchmark index or peer funds to evaluate its relative performance.

Tracking Frequency: NAVs are generally declared on a daily basis. Stay updated with the NAV of your mutual fund scheme to make informed investment decisions.


The Net Asset Value (NAV) of mutual funds is an essential metric that provides investors with insights into the underlying value and performance of their investments. By understanding how NAV is calculated and considering the factors influencing it, investors can make informed decisions and monitor their mutual fund investments effectively.


1. Is a higher NAV always better?

No, a higher NAV does not necessarily indicate a better investment opportunity. The performance and growth potential of a mutual fund scheme should be evaluated in conjunction with its NAV.

2. Can the NAV of a mutual fund go negative?

No, the NAV of a mutual fund cannot go negative. However, it can become very close to zero if the scheme’s assets significantly decline.

3. Can NAV be used as the sole indicator for selecting mutual funds?

While NAV provides important information, it should not be the sole factor in selecting mutual funds. Investors should consider other factors such as fund objectives, past performance, risk profile, and fund manager expertise.

4. Do all mutual funds declare NAV on a daily basis?

Most mutual funds in India declare NAVs on a daily basis. However, some close-ended funds may declare NAVs at regular intervals like weekly or monthly.

5. How often should I review the NAV of my mutual fund investments?

It is advisable to review the NAV of your mutual fund investments periodically, such as monthly or quarterly, to stay updated with the performance of your funds.

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