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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Net Asset Value, Total Expense Ratio and Pricing of Units

Which of the following is the usual reason a scheme's NAV falls on the ex-dividend date of an IDCW payout?

The NAV falls because the distributed IDCW amount leaves the scheme's net assets while the number of units stays unchanged. Lower net assets spread over the same units reduce NAV by about the payout per unit.

  1. AThe AMC levies an exit load on all investors
  2. BThe distributed amount leaves the scheme's net assetsCorrect
  3. CThe units are cancelled at face value
  4. DSEBI reduces the NAV by a fixed percentage

Explanation

When IDCW is paid, cash goes out of the scheme, reducing its net assets while units outstanding stay the same. NAV therefore drops by roughly the per-unit amount distributed. The other options are not mechanisms involved.

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