Net Asset Value
Also written NAV · Net Asset Value (NAV) · Net asset value per unit · NPS · Net Asset Value (NPS)
The net assets of a mutual fund scheme divided by the number of units outstanding — what one unit of the scheme is worth on a given day, after every liability except the unitholders' own.
In plain language
A scheme owns a portfolio. Value that portfolio at today's market prices, add anything the scheme is owed, subtract everything it owes to people other than its own unitholders, and you have the net assets. Divide by the number of units in issue and you have the NAV.
That is the price at which you buy in and, less any exit load, the price at which you get out. It is not a share price and it carries no information about whether the scheme is cheap — a scheme at an NAV of Rs 12 is not better value than one at Rs 480. The NAV only tells you what your units are worth.
Two accounting rules make the number honest. Securities are marked to market, so appreciation counts even though nothing has been sold. And income and expenses are taken on the accrual principle, so a scheme cannot flatter its NAV by sitting on an unpaid bill.
How it works
Take the workbook's own scheme. Investors bought 20 crore units at Rs 10, mobilising Rs 200 crore. Rs 140 crore went into equities and appreciated 10 per cent; Rs 60 crore sat in bank deposits and money market instruments. The scheme received Rs 8 crore of interest and dividend, paid Rs 4 crore of expenses, and owes a further Rs 1 crore.
Net assets are therefore Rs 200 crore of unit capital, plus Rs 3 crore of profit (8 − 4 − 1), plus Rs 14 crore of unrealised appreciation = Rs 217 crore. Across 20 crore units that is Rs 10.85 per unit.
Notice what the Rs 1 crore payable did. It has not been paid, but it has already been deducted. That is the accrual principle, and it is the single most tested line in the calculation.
How far the number is carried is also prescribed: 4 decimal places for index funds, liquid funds and other debt funds, and at least 2 decimal places for equity and balanced funds.
The formula
NAV = Unit-holders' funds in the scheme (net assets)
÷ Number of outstanding units
The same thing read off the balance sheet instead:
NAV = (Total assets − Liabilities other than to unitholders)
÷ Number of outstanding units
And the profit that feeds it:
+ Interest income + Dividend income + Realised capital gains
+ Valuation gains − Realised capital losses
− Valuation losses − Scheme expenses
A worked example
A diversified equity scheme reports, at the close of 31 March:
| Particulars | Rs crore |
|---|---|
| Market value of equity holdings | 150.00 |
| Market value of bonds held | 67.00 |
| Money market instruments | 2.36 |
| Dividend accrued but not received | 1.09 |
| Interest accrued but not received | 2.68 |
| Total assets | 223.13 |
| Less: fees payable | 0.36 |
| Net assets | 222.77 |
| Units outstanding | 1.90 crore |
NAV = 222.77 ÷ 1.90 = Rs 117.25 per unit
Now price a transaction off it. Entry load is banned, so the sale price is the NAV: an investor putting in Rs 25,000 at an NAV of Rs 43.21 receives 25,000 ÷ 43.21 = 578.570 units.
On the way out it is different. At an NAV of Rs 11.00 with a 1 per cent exit load, the re-purchase price is Rs 11.00 − Rs 0.11 = Rs 10.89. The Rs 0.11 does not go to the AMC — exit load is credited straight back to the scheme.
Why NISM asks about it
Chapter 7 (Net Asset Value, Total Expense Ratio and Pricing of Units) is built around this calculation, and the chapter's own sample question hands you the Rs 200 crore scheme and asks for NAV per unit. Expect at least one arithmetic question where an accrued expense or accrued income is dangled to see whether you apply the accrual principle, plus a conceptual question on why marking to market matters and how many decimal places each scheme type must report.
Common exam traps
- Accrued expenses are deducted even though unpaid, and accrued income is added even though unreceived. The workbook says it explicitly: a scheme cannot show better profits by delaying payments.
- A low NAV is not cheap. NAV per unit says nothing about valuation; it depends entirely on the scheme's launch date and history.
- Sale price = NAV. Entry load has been banned, so there is no longer any mark-up on the way in. Exit load is the only load left, and it reduces the re-purchase price.
- An IDCW payout reduces the NAV on the record date. Receiving a dividend from a scheme is not additional return.
- Unrealised appreciation raises NAV but is not distributable. Valuation gains are ignored when computing distributable reserves.
- Decimals matter in a multiple-choice question: 4 places for index, liquid and other debt schemes; at least 2 for equity and balanced.
Where this is taught
- Series II-B · Chapter 8: Basics of Mutual Fundsintroduced here
- Series XVII · Chapter 2: Financial Markets & Investment Productsintroduced here
- Series V-B · Chapter 2: Concept and Role of a mutual fundintroduced here
- Series XIX-B · Chapter 8: Valuationintroduced here
- Series XV · Chapter 10: Valuation Principlesintroduced here
- Series V-A · Chapter 2: Concept & Role of a Mutual Fundintroduced here
- Series V-D · Chapter 2: Concept & Role of a Mutual Fundintroduced here
- Series XII · Chapter 5: Mutual Fundsintroduced here
- Series II-A · Chapter 5: Basics of Mutual Fundsintroduced here
- Series X-A · Chapter 11: Mutual Fundintroduced here
- Series XVII · Chapter 4: Retirement Planning Products: National Pension System
- Series V-D · Chapter 7: Net Asset Value, Total Expense Ratio and Pricing of units
- Series V-A · Chapter 7: Net Asset Value, Total Expense Ratio and Pricing of units
Related terms
- Exit loadA charge levied when an investor redeems units, calculated as a percentage of NAV and deducted from it, usually only if the units are sold within a stated holding period.
- Net assetsThe unitholders' funds in the scheme — original amount invested, profits booked, and appreciation in the investment portfolio.
- Segregated portfolioA ring-fenced sub-portfolio holding the debt instrument hit by a credit event, split out of a scheme so that the good assets stay liquid and exiting investors cannot leave the damaged paper behind.
- Total Expense RatioThe all-in annual cost of a mutual fund scheme as a percentage of daily net assets — the base expense ratio plus brokerage, transaction cost and statutory levies — charged to the scheme, not billed to the investor.
- Accrual principleAll expenses relating to a period are counted whether or not paid, and all income relating to a period is counted whether or not received — so "a scheme cannot show better profits by delaying payments".
- Mark to MarketThe daily settlement of a futures position at that day's closing price, so gains and losses are paid in cash every evening instead of accumulating until expiry.
- Mutual fundA trust registered with SEBI that pools money from many investors and invests it in securities on their behalf — not a different product from shares and bonds, but a different way of owning them.
- UnitThe share of a mutual fund scheme that an investor's money is translated into — typically carrying a face value of Rs 10, and worth whatever the scheme's NAV is on the day.
- Assets under ManagementThe total value of the money a scheme or a fund house manages — the current NAV multiplied by units outstanding — and the base on which the expense ratio is charged.
- SponsorThe person or firm that sets up the mutual fund — applies to SEBI for registration, executes the trust deed in favour of the trustees, and puts up the capital of the AMC.
- Asset Management CompanyThe company that runs a mutual fund's schemes day to day — appointed by the sponsor or trustees with SEBI's approval, and paid a fee out of the scheme rather than a share of its profits.
- Registrar and Transfer AgentThe SEBI-registered agency that keeps the investor records of a mutual fund — processing purchases and redemptions, updating folios and unit capital, and issuing account statements.
- IDCWThe renamed dividend option of a mutual fund scheme — a payout that is part income and part return of your own capital, which is why the NAV falls by exactly the amount distributed.
- Systematic Transfer PlanA standing instruction to move a fixed amount from one scheme into another of the same mutual fund at a set frequency — a withdrawal plan out of the source and a SIP into the target.
- Fixed Maturity PlanA close-ended debt scheme whose portfolio maturity is aligned to the scheme's own maturity date, so the investor who stays to the end has a reasonably visible outcome — though never a guaranteed one.
- Change in control of the AMCWhen ownership of a mutual fund's AMC changes hands, SEBI and the trustees must approve it first and every unit holder must be offered at least 30 calendar days to exit at NAV with no exit load.
- Real estate mutual fund schemesA mutual fund scheme holding actual property: at least 35% of net assets directly in completed, unencumbered Indian real estate, and at least 75% in real estate assets and related securities.
- High-Water MarkThe highest year-end NAV the fund has ever reached, net of operating, transaction and management costs — the manager earns no incentive fee until the NAV climbs back above it.
- Distributions to Paid-in CapitalCumulative cash actually distributed to investors divided by the capital they have paid in — the realisation multiple, and the one return measure a fund cannot flatter with its own valuations.
- Exchange Traded FundA mutual fund scheme whose units are listed and traded on a stock exchange like a share, so you transact at live prices through the day instead of at one end-of-day NAV.
- Base Expense RatioThe management-and-administration slice of a scheme's cost, capped by the SEBI slabs — the first and largest of the four components that add up to Total Expense Ratio.
- Gross Net Asset ValueThe value of a Category III AIF's assets before incentive fees are deducted — and the base on which management fees are charged, which is why it is not the same as the NAV investors see.
- Official Point of AcceptanceA location a mutual fund has formally designated to receive transaction requests, where the application is time-stamped — and that stamp, not the moment the investor handed the form over, decides which NAV applies.
- Dividend Distribution TaxThe tax a mutual fund scheme itself deducted before paying a dividend, abolished from April 2020 — since when the payout has instead been taxed in the investor's own hands at their slab rate.
- Unit capitalThe number of units a mutual fund scheme has issued multiplied by their face value — an accounting figure that records what investors contributed, not what their holding is worth today.
- Tracking errorThe gap between the return of a passive fund and the return of the index it is trying to replicate — the measure of how faithfully an index fund or ETF does its one job.
- Systematic Withdrawal PlanA standing instruction to redeem a set amount — or only the appreciation — from a mutual fund scheme at a chosen frequency, used to manufacture a regular income in retirement.
- Real Estate Investment TrustA SEBI-registered trust that pools investors' money into commercial real estate and lists its units on a stock exchange, so rent-yielding property can be bought in small lots and sold in a day.
- Face valueThe denomination a company's capital is divided into and carried in its books — fixed, printed on the certificate, and the base on which dividend percentages and stock splits are computed.
- Credit riskThe risk that a borrower fails to meet its obligations on a debt instrument — the risk credit rating agencies exist to grade, and the one that triggers a segregated portfolio in a mutual fund.
- New Fund OfferThe period in which a mutual fund scheme's units are offered to the public for the first time, at a fixed NFO price rather than at NAV, and during which the registrar builds the scheme's first register of investors.
- Instant Access FacilityA facility that credits redemption proceeds to a resident individual investor's bank account on the same day, offered only in overnight and liquid schemes and only through the AMC's own website or app.
- Cut-off timeThe SEBI-prescribed clock time that, read together with the time stamp on the request, decides which day's NAV a mutual fund transaction is priced at.
- FATCA and CRSTwo cross-border tax transparency regimes — one American, one OECD — under which a mutual fund's registrar identifies foreign-taxable investors and reports their accounts to the CBDT for automatic exchange.
- Capital appreciationThe gain made when the market value of an investment rises above what you paid for it — as distinct from income, which is the interest or dividend the investment pays you along the way.
- Central Recordkeeping AgencyThe intermediary that holds every NPS subscriber record — it issues the PRAN, unitises contributions at scheme NAV and sits between the subscriber, the pension funds and the trustee bank.
- Multiple Scheme FrameworkThe PFRDA framework, effective 1 October 2025, that lets non-government NPS subscribers hold branded pension-fund schemes alongside the existing Common Schemes under a single PRAN at each CRA.
- Unit Linked Insurance PlanA life insurance policy in which the premium, after the cost of risk cover and expenses, is invested in equity or debt funds chosen by the policyholder, so the maturity value is the fund value.
- Total Value to Paid-in CapitalA fund's investment multiple: cumulative distributions plus the residual value of unsold investments, divided by paid-in capital — equivalently, DPI plus RVPI.
- CustodianThe SEBI-registered entity that holds a fund's securities in accounts of its own and settles its trades, so the assets sit somewhere other than with the manager who decides what to buy.
- Specialized Investment FundA mutual fund product line introduced by SEBI in 2024 for sophisticated strategies, with a minimum investment of Rs 10 lakh across all of an AMC's strategies — sitting between mutual funds and PMS.
- Fund of fundsAn AIF that invests in the units of other AIFs rather than directly in investee companies — buying diversification across managers and strategies, and paying two layers of fees for it.
- Management FeeThe fixed annual fee an AIF pays its investment manager for managing the fund — charged on committed capital in Category I and II funds and on gross NAV in Category III, regardless of performance.
- IPEV GuidelinesThe international best-practice guidelines for valuing unlisted private equity and venture capital investments at fair value, setting out seven widely used methods for valuing a portfolio company.