10.2 New Fund Offer Price and Ongoing Offer Price for Subscription

NISM-Series-V-A: Mutual Fund Distributors Certification Examination Exam

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1 Chapter 1: Introduction & Exam Overview

1.1 About the NISM-Series-V-A Examination 1.2 The 12-Unit Curriculum Map and a Study Plan

2 Chapter 2: Investment Landscape

2.1 Investors and Their Financial Goals 2.2 Savings or Investments? 2.3 Different Asset Classes 2.4 Investment Risks 2.5 Risk Measures and Management Strategies 2.6 Behavioural Biases in Investment Decision Making 2.7 Risk Profiling 2.8 Asset Allocation and Do-It-Yourself versus Professional Help

3 Chapter 3: Concept and Role of a Mutual Fund

3.1 Concept of a Mutual Fund 3.2 Classification of Mutual Funds 3.3 Growth of the Mutual Fund Industry in India

4 Chapter 4: Legal Structure of Mutual Funds in India

4.1 Structure of Mutual Funds in India 4.2 Key Constituents of a Mutual Fund 4.3 AMC Organisation Structure and Service Providers 4.4 Role and Function of AMFI

5 Chapter 5: Legal and Regulatory Framework

5.1 Role of Regulators in India 5.2 Role of SEBI and the Mutual Fund Regulations 5.3 Due Diligence Process by AMCs for Distributors 5.4 Investor Grievance Redress Mechanism 5.5 AMFI Code of Conduct for Intermediaries

6 Chapter 6: Scheme Related Information

6.1 Mandatory Documents I: Scheme Information Document and Statement of Additional Information 6.2 Mandatory Documents II: Key Information Memorandum and the Advertisement Code 6.3 Non-Mandatory Disclosures

7 Chapter 7: Fund Distribution and Channel Management Practices

7.1 The Role and Importance of Mutual Fund Distributors 7.2 Different Kinds of Mutual Fund Distributors 7.3 Modes of Distribution 7.4 Pre-requisites to Become a Distributor of a Mutual Fund 7.5 Revenue for a Mutual Fund Distributor 7.6 Commission Disclosure Mandated by SEBI 7.7 Distributors versus Investment Advisers, Nomination Facilities and Change of Distributor

8 Chapter 8: Net Asset Value, Total Expense Ratio and Pricing of Units

8.1 Fair Valuation Principles 8.2 Computation of Net Assets of a Scheme and NAV 8.3 Dividends and Distributable Reserves 8.4 Entry and Exit Load and Its Impact on NAV 8.5 The Expense Ratio Framework: Base Expense Ratio, Brokerage and Statutory Levies 8.6 Key Accounting and Reporting Requirements 8.7 NAV, Total Expense Ratio and Pricing of Units for the Segregated Portfolio

9 Chapter 9: Taxation

9.1 Applicability of Taxes in Respect of Mutual Funds 9.2 Capital Gains on Mutual Fund Units 9.3 Dividend (IDCW) Income and Tax Deducted at Source 9.4 Stamp Duty and Securities Transaction Tax on Mutual Fund Units 9.5 Setting Off Capital Gains and Losses under the Income Tax Act 9.6 Tax Benefit under Section 80C and Applicability of GST

10 Chapter 10: Investor Services

10.1 The New Fund Offer Process 10.2 New Fund Offer Price and Ongoing Offer Price for Subscription 10.3 Investment Plans and Services 10.4 Allotment of Units and Account Statements 10.5 Mutual Fund Investors: Who Can Invest 10.6 Filling the Application Form for Mutual Funds 10.7 Financial Transactions with Mutual Funds 10.8 Cut-Off Time and Time Stamping 10.9 KYC Requirements for Mutual Fund Investors 10.10 Systematic Transactions and Their Operational Aspects 10.11 Non-Financial Transactions, Special Investor Categories and Turnaround Times

11 Chapter 11: Risk, Return and Performance of Funds

11.1 General and Specific Risk Factors 11.2 Factors That Affect Mutual Fund Performance 11.3 Drivers of Returns and Risk in a Scheme 11.4 Measures of Returns 11.5 SEBI Norms Regarding Representation of Returns 11.6 Risks in Fund Investing: The Investor's Perspective 11.7 Measures of Risk and Provisions Relating to Credit Risk

12 Chapter 12: Mutual Fund Scheme Performance

12.1 Benchmarks and Performance 12.2 Price Return Index or Total Return Index 12.3 Basis of Choosing an Appropriate Performance Benchmark 12.4 Benchmarks for Equity Schemes 12.5 Benchmarks for Debt Schemes and Other Schemes 12.6 Quantitative Measures of Fund Manager Performance 12.7 Tracking Error and Scheme Performance Disclosure

13 Chapter 13: Mutual Fund Scheme Selection

13.1 Scheme Selection Based on Investor Needs, Preference and Risk Profile 13.2 Risk Levels in Mutual Fund Schemes 13.3 Scheme Selection Based on Investment Strategy 13.4 Selecting a Scheme Across AMCs or Within a Scheme Category 13.5 Selecting Options in Mutual Fund Schemes and Do's and Don'ts

10.2 New Fund Offer Price and Ongoing Offer Price for Subscription

Key Takeaways Explain This Topic AI

Units in an NFO are typically offered at the face value of INR 10 per unit.

After an open-ended scheme reopens, units are sold at the applicable NAV with no entry load.

The ongoing offer price equals NAV because entry load has been prohibited since August 2009.

Close-ended schemes do not have an ongoing offer; after the NFO, units trade on the exchange at market price.

The market price of a listed close-ended scheme frequently differs from its NAV, often at a discount.

Last updated: August 2026

Pricing During the NFO

Units in a New Fund Offer are typically offered at the face value of INR 10 per unit .

The face value is a starting reference point, nothing more. It does not indicate that the scheme is cheap and it does not create any advantage. An investor putting INR 1,00,000 into an NFO at INR 10 receives approximately 10,000 units; the same amount into an established scheme at NAV INR 250 receives 400 units. Both hold INR 1,00,000 of the same kind of asset.

Stamp duty at 0.005% is deducted before allotment, so the units allotted are computed on the net amount.

The Ongoing Offer Price

Once an open-ended scheme reopens for continuous sale — within five business days of allotment — the price at which units are sold is: Ongoing offer price = Applicable NAV

There is nothing added. Because entry load has been prohibited since August 2009 , the sale price equals NAV, and the concept of a "sale price" distinct from NAV no longer exists in the Indian market.

This was not always so. Before 2009 the sale price was NAV plus entry load, so an investor subscribing INR 1,00,000 to a scheme with a 2.25% entry load bought units worth INR 97,750. Older textbooks contain formulae for computing sale price from NAV and load; those formulae are now of historical interest only, and a candidate who applies them will get contemporary questions wrong.

The Repurchase Price

The corresponding position on redemption: Repurchase price = Applicable NAV, from which any exit load is deducted from the proceeds

As section 8.4 established, units are redeemed at NAV and the exit load is deducted from the amount payable. NAV itself is not reduced for load.

Close-Ended Schemes Have No Ongoing Offer

Open-ended Close-ended
Units available after NFO Yes, continuously at NAV No
How to buy afterwards From the fund at NAV Only from another investor on the exchange
How to sell Redeem to the fund at NAV Only on the exchange, at market price
Price NAV Market price , which may differ from NAV

A close-ended scheme issues units only during the NFO. Because there is no ongoing repurchase, SEBI requires the units to be listed on a stock exchange , and that listing is the investor's only exit route before maturity.

The market price is set by supply and demand, not by NAV. Listed close-ended schemes commonly trade at a discount to NAV , sometimes a substantial one, because the units are illiquid and no arbitrage mechanism forces convergence. An investor in a close-ended scheme who needs to exit early may therefore realise materially less than the NAV published on that day.

This is a genuine and frequently under-disclosed risk. A distributor selling a close-ended scheme must explain that early exit is at market price, not NAV, and that the two can diverge.

Interval Schemes

Interval schemes sit between the two. Units are available for purchase and redemption at NAV , but only during pre-specified transaction periods . Outside those windows the only route is the exchange, at market price, exactly as for a close-ended scheme.

Summary of Pricing

Situation Price
NFO subscription Face value, typically INR 10
Open-ended ongoing purchase Applicable NAV
Open-ended redemption Applicable NAV, less exit load from proceeds
Close-ended, before maturity Exchange market price
Close-ended, at maturity NAV on the maturity date
Interval, during transaction period Applicable NAV
Interval, outside transaction period Exchange market price

The single most examinable line: for an open-ended scheme in India today, the price is the NAV — nothing is added on purchase, and any exit load is taken from the proceeds rather than from the NAV.

The Ongoing Offer Period

An open-ended scheme's ongoing offer period begins when it reopens after the NFO and, in principle, never ends. During it:

Units are available for purchase on every business day at the applicable NAV
Units may be redeemed on every business day at the applicable NAV
Minimum amounts for purchase, additional purchase and redemption apply as stated in the scheme documents
Systematic facilities may be registered

An AMC may suspend fresh subscriptions into a scheme temporarily, most commonly where a small cap scheme has reached the size at which further inflows would be difficult to deploy without moving prices. This restricts purchases only; existing investors may continue to redeem , and in most such cases systematic instalments already registered are allowed to continue.

A related restriction now arises from the NFO deployment rule: an AMC that has failed to deploy NFO proceeds within the prescribed period faces restrictions on accepting fresh flows into that scheme until deployment is complete.

What Determines the Applicable NAV

The phrase "applicable NAV" carries specific content, developed fully in section 10.8. In outline:

Transaction Applicable NAV depends on
Purchase, most schemes Receipt at an Official Point of Acceptance before 3:00 PM and realisation of funds
Purchase, liquid and overnight Receipt before 1:30 PM and funds available before cut-off
Redemption, all schemes Receipt at an Official Point of Acceptance before 3:00 PM

The purchase side is the one that surprises investors, because the money must actually be with the scheme , not merely on its way. A distributor who promises a specific day's NAV without controlling both conditions has made a promise they cannot keep.

Minimum Amounts

Scheme documents state minimum amounts, which typically differ by transaction type — a higher minimum for a first purchase, a lower one for additional purchases, and a lower one still for systematic instalments. Redemption minimums also apply, along with a minimum balance that must remain in the folio; a partial redemption taking the balance below that minimum is generally processed as a full redemption of the remaining units, which occasionally surprises an investor who intended to retain a small holding.