8.2 Computation of Net Assets of a Scheme and NAV

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

8.2 Computation of Net Assets of a Scheme and NAV

Key Takeaways Explain This Topic AI

Net assets equal the market value of investments plus receivables and accrued income, less liabilities and accrued expenses.

NAV per unit equals net assets divided by the number of units outstanding.

Expenses accrue daily, so published NAV is always net of the expense ratio.

Direct and regular plans of the same scheme have different NAVs because their expense ratios differ.

NAV is computed to four decimal places for liquid and debt schemes and at least two for equity schemes.

Last updated: August 2026

The Computation Net Assets = Market value of investments
+ Receivables
+ Accrued income
+ Other current assets
Liabilities
Accrued expenses

NAV per unit = Net Assets / Number of units outstanding

Every component matters, and questions are built by omitting one.

Market value of investments — every holding at fair value on the valuation day.

Receivables — amounts due to the scheme: sales of securities awaiting settlement, dividends declared but not received, interest due.

Accrued income — interest earned but not yet due. A bond paying half-yearly interest accrues daily, so the scheme recognises a proportionate amount each day. This is why a debt fund's NAV rises slightly on a day when prices are flat: accrual is running.

Liabilities — purchases of securities awaiting settlement, redemption payouts due, borrowings.

Accrued expenses — management fees, trustee fees, custodian and RTA charges, audit fees and other recurring expenses, accrued daily .

Worked Example

A scheme on a given valuation day:

Item INR crore
Market value of equity holdings 1,240.00
Cash and money market instruments 46.00
Dividend receivable 3.50
Accrued interest 0.80
Payable for securities purchased 21.00
Redemption payable 6.30
Accrued expenses 2.00 Assets = 1,240.00 + 46.00 + 3.50 + 0.80 = 1,290.30
Liabilities = 21.00 + 6.30 + 2.00 = 29.30
Net assets = 1,290.30 - 29.30 = 1,261.00 crore
With 28 crore units outstanding: NAV = 1,261.00 / 28 = INR 45.0357 per unit
Expenses Accrue Daily

The expense ratio is not deducted annually or charged separately. It is accrued every day as a proportionate fraction and subtracted before NAV is struck.

Illustration. A scheme with net assets of INR 1,261 crore and a total expense ratio of 1.60% per annum accrues, on a 365-day basis: Daily accrual = 1,261 crore x 1.60% / 365 = approx INR 0.055 crore per day

The consequence stated plainly: the NAV an investor sees is already net of all recurring expenses. Returns computed from NAV are therefore net returns, and there is no separate expense deduction to allow for afterwards. A distributor who tells an investor that expenses will be deducted from their returns "at the end of the year" is describing something that does not happen.

Why Direct and Regular Plans Have Different NAVs

A scheme's direct and regular plans hold exactly the same portfolio . They differ only in expense ratio, because the regular plan carries distribution commission and the direct plan does not.

Since expenses accrue daily and reduce net assets, the two plans' NAVs diverge steadily over time :

Regular plan Direct plan
Portfolio Identical Identical
Expense ratio Higher Lower
NAV Grows more slowly Grows faster

Over a long holding period, an expense difference of 0.7 percentage points a year compounds into a material gap. This is arithmetic, not opinion, and a distributor should be able to state it accurately while explaining what the regular plan's cost purchases.

Rounding and Publication

Requirement Rule
Decimal places, liquid and debt schemes Four
Decimal places, equity and hybrid schemes At least two
Frequency Every business day
Publication AMC website and AMFI website
Timing By the prescribed deadline each business day

The finer rounding for liquid and debt schemes exists because their daily movements are small — a two-decimal NAV would round away a meaningful part of a liquid fund's daily return.

What Does Not Change NAV per Unit

A frequent source of confusion: subscriptions and redemptions do not change NAV per unit. When an investor buys, both net assets and units rise proportionately; when an investor redeems, both fall proportionately. NAV per unit moves only because the value of the portfolio changes, income accrues, expenses accrue, or a distribution is paid.

Reconciling a Day's NAV Movement

When an investor asks why NAV moved, the change decomposes into a small number of components: Change in NAV = market value movement of holdings

+ income accrued for the day
expenses accrued for the day
any distribution paid on that date

For an equity scheme , the first term dominates and the others are rounding. For a liquid scheme , the first term is negligible and the second dominates, which is why a liquid fund's NAV rises by a small, steady amount almost every business day.

This decomposition answers the two most common queries directly. A debt fund NAV that fell on a day when nothing traded moved because valuation agency prices changed. A NAV that dropped sharply on a specific date with no market fall almost certainly reflects a distribution on that record date.

Why NAV Is Computed Only Once a Day

Unlike a share price, NAV is not continuous . It is struck once, after market close, from the day's closing prices. There is no intraday NAV for an open-ended scheme, and an investor cannot transact at a price observed during the day.

This is what makes cut-off timings necessary. Without them, an investor could watch the market rise through the afternoon and subscribe at a NAV computed before that rise, at the expense of existing unitholders. The single daily NAV and the cut-off rules covered in section 10.8 work as a pair.

Exchange traded funds are the exception in appearance only. An ETF trades continuously at a market price on the exchange, and that price may differ slightly from NAV. The scheme still computes one NAV per day; the exchange price is what other investors are willing to pay, and arbitrage by authorised participants keeps the two close.

Business Days and Non-Business Days

NAV is computed on every business day . On holidays and weekends there is no NAV, and transactions received are processed against the next business day's NAV subject to the usual realisation rules. A scheme with substantial overseas holdings may face days when the Indian market is open and the foreign market is not, which the valuation policy addresses through prescribed treatment of stale prices.