Mutual Fund Cut off Time

In the recent report published by the Association of Mutual Funds in India, Assets Under Management (AUM) of the Indian Mutual Fund Industry stood at ₹ 67,09,259 crore as of September 30, 2024. This data indicates the strong inclination of investors towards investing in mutual funds. Moreover, in 5 years, the Mutual Fund Industry’s AUM has grown from ₹ 24.51 trillion as of September 30, 2019, to ₹ 67.09 trillion as of September 30, 2024, a more than 2 fold increase. Let’s begin by learning more about mutual funds, mutual fund cut-off time, mutual fund redemption time, mutual fund redemption cut-off time, mutual fund timing, and more in detail. Keep reading!

What is the mutual fund cut-off time?

In India, mutual fund cut-off time follows Indian Standard Time (IST) and is based on the types of mutual schemes and payment modes. The NAV of mutual funds is announced at the end of each trading day. This may be lower than the previous day’s value or more by a significant quantum.

Investors can invest in a mutual fund before the trading day closes and the NAV is announced. The cut-off time on any trading day is 2.30 p.m. for all the purchase transactions. You have to submit an application to AMCs (Asset Management Companies) or RTAs (Registrar and Transfer Agents) before 2.30 p.m. to invest in a fund at the current NAV.

What is NAV in Mutual Funds?

NAV is used to measure market value per share for a particular mutual fund. NAV is calculated by dividing the total value of securities in a mutual fund less the liabilities, by the total number of shares outstanding. NAV changes differently from stock prices. Mutual fund updates their NAV at the end of each trading day while stocks fluctuate every hour during trading hours.

Mutual fund cut-off timings in India

Effective February 1, 2021, SEBI has introduced a new rule on applicable NAV, impacting mutual fund cut-off times.

Below table indicates the same:

SEBI New Rule for Mutual Fund Cut Off

Based on the nature of schemes, there are several cut-off times in practice for mutual funds in India:

 As per SEBI circular no. SEBI/HO/IMD/DF2/CIR/P/2020/175 dated September 17, 2020, read with circular no. SEBI/HO/IMD/DF2/CIR/P/2020/253 dated December 31, 2020, effective from February 1, 2021, the applicable NAV in respect of purchase of units of mutual fund scheme shall be subject to realization & availability of the funds in the bank account of mutual fund before the applicable cut off timings for purchase transactions, irrespective of the amount of investment, under ALL mutual fund schemes. (The above rule is already applicable for purchase transactions under Liquid funds and Overnight funds.)

Applicable NAV for Mutual Funds Transactions

NAV for a mutual fund transaction includes all purchases except for liquid and overnight funds. This also includes all transactions within mutual fund schemes, like switch-in transactions. Below are specific rules for mutual transactions, regardless of how much you invest.

For Inter-scheme Switch Transaction 

Which NAV is applicable on switching mutual funds?

 You might choose to swap your investments across investment schemes by applying. The earliest processing day applies to both "switch out" and "switch in" transactions. "Switch in" applications are treated the same as purchase applications, with the NAV based on the acquisition deadline. “Switch out” applications are considered as applications for redemption, with the NAV determined by the redemption deadline.

Earlier, mutual fund cut-off times worked like stocks and shares, allowing purchases when prices were low. However, with the new SEBI circular, the NAV now depends completely on when the mutual fund processes your investment.  

Why is Mutual Fund Cut Off So Important?

According to SEBI Mutual Fund Regulations, fund companies must announce the NAVs of all mutual fund schemes at the end of the trading day. For purchase, most mutual fund schemes have a cut-off time of 3 p.m., whereas you can invest until 3 p.m. for liquid fund schemes and still get the day’s NAV.

If you submit your application after the cut-off times, your application will still be accepted, but you will receive the next working day’s NAV. The cut-off time guidelines apply to redemptions. Under SEBI regulations, all mutual funds must adhere to these cut-off periods except liquid funds. The future NAV determines how mutual fund units are allocated. It is calculated based on the closing market value of the securities in each scheme, declared at the end of the day.

How to overcome issues of delayed NAV allotment due to fund realization timings?

Here are a few solutions to overcome issues of delayed NAV allotment due to fund realization timings:

1. Using AMC’s website/app You can use AMC’s website/app to make your investment; the fund might received immediately. This increases the chances of getting the same day’s NAV.
2. Using third-party platforms You can use third-party platforms such as NSE/BSE to invest. Due to operational requirements, the cut-off timing is earlier (e.g., 2:30 p.m.). Any transaction performed on these platforms before this time will be treated the same as directly done on AMC’s website.
3. Investing close to the cut-off time Using AMC’s direct website, you can invest close to the cut-off time (like within the last half hour before 3:00 p.m.). Using this, you can get the same day’s NAV and ensure your funds are received on the same day.