NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors

Net Asset Value, Total Expense Ratio and Pricing of Units: formula sheet

Full chapter guide

Key formulas

NAV per unit: NAV = (Market value of investments + Other assets − Liabilities and accrued expenses) ÷ Units outstanding; Use net assets in the numerator. Units outstanding is the figure at the valuation date.
Net assets: Net assets = Total assets − Total liabilities; Total assets include accrued income and receivables. Liabilities include accrued expenses and payables.
Units from an investment: Units allotted = Amount invested ÷ Applicable NAV; Any exit load or stamp duty is handled separately. Check whether the question asks for the net amount invested.
Redemption value: Redemption value = Units × NAV, less exit load if any; Exit load is a percentage of the NAV or of the redemption value.
Percentage change in NAV: Change % = (Closing NAV − Opening NAV) ÷ Opening NAV × 100; This is the basic return over the period, before considering dividends.
NAV per unit: NAV = (Market value of investments + Receivables + Accrued income + Other assets − Accrued expenses − Payables − Other liabilities) ÷ Units outstanding; Net assets divided by units. Accrued income adds to NAV. Accrued expenses reduce it.
Traded equity valuation: Value = Last quoted closing price on the AMC's selected primary exchange × Number of shares; Cost price is never used for a traded security.
Non-traded equity: No trade on any exchange in the 30 days before the valuation date → value at fair value per the AMC's approved policy; A trade in the last 30 days means the security counts as traded.
Debt and money market securities: Residual maturity above 30 days → price from AMFI-appointed valuation agencies; AMCs do not choose their own prices for these.
Amortisation (residual maturity up to 30 days): Daily accretion = (Redemption value − Current value) ÷ Days remaining; Straight-line. Value rises by an equal amount each day until maturity.
Dividend recognition: Equity dividend is recorded as income on the ex-dividend date; Not the record date and not the payment date.
Sale price (purchase price): Sale price = NAV + Entry load = NAV (entry load is nil); Entry load has been banned since 1 August 2009, so you pay the applicable NAV.
Repurchase price (redemption price): Repurchase price = NAV − Exit load = NAV × (1 − exit load %); Exit load is a percentage of NAV, not of the amount invested.
Redemption proceeds: Proceeds = Units redeemed × Repurchase price; Tax and other statutory deductions, if any, come on top of this.
Units allotted: Units = Amount invested ÷ Applicable NAV; With no entry load, the whole amount buys units (ignoring stamp duty on purchase).
Exit load treatment: Exit load is credited to the scheme; It benefits the continuing unitholders, subject to SEBI's permitted limit for AMC retention.
Cut-off for most schemes (purchase and redemption): Valid application before 3:00 pm → NAV of that day; after 3:00 pm → next business day's NAV; For purchases, funds must also be available for utilisation before the cut-off. Applies to equity, debt and similar schemes other than liquid and overnight for purchases.
Purchase in liquid and overnight funds: Application up to 1:30 pm and funds available before cut-off → NAV of the day immediately preceding the day of receipt; After 1:30 pm, a later day applies. Remember this is the previous day's NAV, not the same day's.
Redemption in liquid funds: Application before 3:00 pm → closing NAV of the day of receipt; after 3:00 pm → next business day's NAV; Redemption cut-off is 3:00 pm, unlike the 1:30 pm purchase cut-off.
Stamp duty on purchase of units: Stamp duty = 0.005% × purchase amount; Charged on purchases, including SIP, STP, switch-in and IDCW reinvestment. Not on redemption.
Units allotted after stamp duty: Units = (Amount invested − Stamp duty) ÷ Applicable NAV; Stamp duty is deducted before allotment, so units are based on the net amount.
Net Asset Value: NAV = (Market value of assets − Liabilities and expenses) ÷ Units outstanding; This is the base price before any swing adjustment.
IDCW per unit: IDCW per unit = IDCW rate (%) × Face value per unit; The rate applies to face value, not to NAV.
Ex-IDCW NAV: Ex-IDCW NAV = Cum-IDCW NAV − IDCW per unit; NAV falls by the amount paid out. Statutory levies, if any, are ignored in basic questions.
Swung NAV on net outflow: Swung NAV = NAV × (1 − swing factor); Used when net redemptions cross the threshold. Illustrative form; the factor is set under SEBI rules.
Investor wealth after IDCW: Wealth = Units × Ex-IDCW NAV + IDCW received; This equals units × cum-IDCW NAV, so IDCW creates no extra wealth.

Quick revision

NAV per unit = (market value of assets + receivables + accrued income − liabilities − accrued expenses) ÷ units outstanding.
Example: net assets of ₹100 crore and 5 crore units give a NAV of ₹20.0000.
NAV is declared net of expenses, since expenses are accrued daily and deducted before NAV is worked out.
Listed securities are valued at the closing price on the exchange; debt securities use prices from AMFI-appointed valuation agencies.
TER is the annual cost of running the scheme as a percentage of assets; its limits are slab-based and fall as assets grow.
Direct Plans have a lower TER than Regular Plans because there is no distribution commission.
Entry load is not permitted for mutual fund schemes; exit load is allowed and is credited to the scheme, net of GST.
Redemption price = NAV − exit load. Example: NAV ₹25 and 1% exit load give ₹24.75.
Stamp duty on purchases of units is 0.005%; on ₹1,00,000 it is ₹5, so units are allotted against ₹99,995.
Cut-off for most schemes is 3:00 pm; the applicable NAV also depends on when funds are available for utilisation.
Liquid and overnight schemes follow different cut-off rules from other schemes, so never apply the 3:00 pm rule to them blindly.
Swing pricing adjusts NAV in stressed conditions so that the cost of heavy redemptions falls on exiting investors, not those who stay.

Common mistakes

Dividing total assets by units without deducting liabilities. Fix: Always subtract liabilities and accrued expenses before dividing.
Thinking a lower NAV means a cheaper and better fund. Fix: Remember that NAV is value per unit. Compare funds on percentage returns, not NAV levels.
Valuing a traded equity holding at purchase cost. Fix: Mutual funds mark to market. Traded equity is valued at the closing price on the primary exchange.
Thinking the AMC can pick any price for debt securities. Fix: Debt and money market securities above the short-maturity threshold use prices from AMFI-appointed valuation agencies.
Adding an entry load to NAV when the question describes a purchase. Fix: Remember that entry load is banned since 1 August 2009. Sale price equals the applicable NAV.
Applying exit load to the amount invested rather than to the NAV at redemption. Fix: Exit load is a percentage of the NAV on the redemption date. Use that NAV.
Giving a liquid fund purchase the same-day NAV. Fix: For liquid and overnight purchases received by 1:30 pm with funds available, use the previous day's NAV.
Using 3:00 pm as the cut-off for liquid fund purchases. Fix: Remember purchases 1:30 pm, redemptions 3:00 pm for liquid funds.
Applying the IDCW rate to NAV instead of face value Fix: Always multiply the rate by face value, unless the question states IDCW in rupees per unit.
Saying NAV is unchanged after IDCW Fix: Cash leaves the fund, so NAV falls by the IDCW per unit.

Exam tips

Read for the words 'net' and 'accrued expenses'. Most trap options ignore liabilities.
Questions on NAV level are conceptual. A higher NAV does not mean a better fund.
Know that open-ended schemes declare NAV every business day and that new units are priced at the applicable NAV.
Do the arithmetic once and round last. Options often differ only in the second decimal.
Remember that NFO units are usually issued at ₹10, with the scheme's offer document as the final reference.
Expect direct-recall MCQs on who prices what: exchange closing price for traded equity, AMFI-appointed agencies for debt and money market securities. Learn this pair cold.
Questions often pair a rule with its trap, such as cost price, payment date or record date. Eliminate these first.
In NAV sums, write assets and liabilities in two lines before calculating. Most lost marks come from missing accruals.