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

Ravi invests Rs 1,20,000 in a scheme through a SIP of Rs 10,000 per month for 12 months. A SIP instalment of Rs 10,000 is made on the 5th of each month, and the SIP is registered as a monthly SIP through ECS. In month 7 the instalment date falls on a day that is not a business day. Which is correct under normal mutual fund practice?

The units are allotted at the NAV of the next business day. When a SIP date falls on a holiday, the instalment is processed on the following business day, subject to cut-off rules. It is not cancelled, given an old NAV, or turned into a lump sum.

  1. AThe instalment is cancelled permanently
  2. BThe units are allotted at the NAV of the next business dayCorrect
  3. CThe units are allotted at the previous month's NAV
  4. DThe SIP is converted to a lump sum

Explanation

If the SIP date is a non-business day, the instalment is processed on the next business day and units are allotted at that day's NAV, subject to the cut-off rules. It is not cancelled, backdated to an older NAV, or converted to a lump sum.

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