All mutual funds have a purchase and a redemption cut-off time. The cut-off time determines which day’s Net Asset Value (NAV) of the fund will be applicable to your investment.
Cut-off time for buying mutual funds
|Mutual Fund Scheme||Purchase Cut-off Time||If submitted by cut-off time||If submitted after cut off time|
|Liquid Fund||2 pm||NAV of preceding day||NAV of same day|
|Equity/Debt Funds (Investment amount<Rs. 2 lakh)||3 pm||NAV of same day||NAV of next day|
|Equity/Debt Funds (Investment amount>Rs. 2 lakh)||3 pm||NAV of same day||NAV of next day|
The cut-off time for buying liquid funds is 2 pm. Thus, if you submit a purchase application for a liquid fund and also make the payment to the mutual fund before 2 pm on a working day, you will get the mutual fund’s units at NAV of the preceding day. However, if you submit the application and transfer the funds after 2 pm, you will be allotted the mutual fund’s units at the same day’s NAV.
It is important to note that in order to get the NAV of the desired day, you need both the submission of application and transfer of funds as per the cut-off time.
Equity and Debt Funds
The cut-off time for the purchase of equity and debt funds is 3 pm. Unlike liquid funds, if you submit the application for purchase of an equity fund or a debt fund before 3 pm, you will be alloted the mutual fund units at the NAV of the same day. In case of submission of purchase application after 3 pm, the equity/debt mutual fund units are allotted at the NAV of the next day.
It is important to note that in case of an investment of less than Rs. 2 lakh in an equity or a debt fund, you only need to submit the purchase application as per the cut-off time to get the desired NAV as the time of transfer of funds is not taken into account in such cases. However, if you are investing an amount equal to or more than Rs. 2 lakh and you want to get the same day’s NAV, you need to ensure that both the submission of application and transfer of funds happen before the cut-off time.
Cut-off time for redemption of mutual funds
The cut-off time for the redemption of all mutual funds (liquid, equity and debt funds) is 3 pm. Thus, if you redeem or sell the units of a mutual fund before 3 pm, you would get your redemption amount as per the fund’s NAV of the same day. However, in case you redeem your mutual fund units after 3 pm, the value of your redemption amount will be as per the fund’s NAV of the next day.
What should you do?
If you wish to invest a huge amount or wish to make an investment in a mutual fund for a long term, then it is important for you to act as per the cut-off timings as they result in significant differences in the value of investment in such cases. However, if you are investing a small amount or wish to invest with a short-term perspective, then you need not bother yourself with the cut-off timings as they do not result in significant differences in such cases.