Mutual fund cut-off time refers to the specific time set by regulatory authorities, such as SEBI, that determines which day's Net Asset Value (NAV) will be applicable for your mutual fund transactions. This timing is critical for both purchases and redemptions, ensuring that investors know exactly when they need to submit their orders. Cut-off times vary for different types of funds. For equity funds, the cut-off time is generally 3 PM, while for liquid funds, it may differ. Submitting your request before the designated time ensures you receive the NAV of the same day; otherwise, the next business day's NAV will apply.
Cut-off times are essential because they directly influence the NAV at which your transaction is executed. Being aware of these deadlines enables investors to strategically plan their investments or redemptions, potentially maximising returns or minimising losses depending on market conditions. In this article, we'll look into the meaning of mutual fund cut-off time, explore the SEBI regulations surrounding it, and explain how it impacts the Net Asset Value (NAV) you receive for your transactions.
What is mutual fund cut-off time?
The mutual fund cut-off time in India follows Indian Standard Time (IST) and varies based on the type of mutual fund schemes and payment modes. For liquid fund schemes, the cut-off time is typically earlier compared to other funds. Orders placed before the cut-off time will receive the same day's NAV, while orders after the deadline will get the next business day’s NAV. These timings are crucial for transactions with any mutual fund firm.
To secure the day's NAV for your mutual fund purchase, you will need to initiate the transaction by 3:00 PM. This deadline applies to most mutual fund schemes and is set by AMCs (Asset Management Companies) or RTAs (Registrar and Transfer Agents) in accordance with SEBI regulations. Transactions placed after 3:00 PM will be processed at the next business day's NAV.
Cut-off time for mutual fund transactions
SEBI, India's regulatory authority, has introduced a new rule on applicable NAV, effective from February 1, 2021, impacting mutual fund cut-off times. The table below outlines the revised cut-off timings for various mutual fund schemes based on fund realisation.
Type of schemes |
Cut-off time in IST |
Liquid Funds and Overnight Funds (Subscription including Switch-in from other schemes) |
1:30 PM |
Liquid Funds and Overnight Funds (Redemption including Switch-in from other schemes) |
3:00 PM |
All other schemes (Subscription including Switch-in from other schemes) |
3:00 PM |
All other schemes (Redemption including Switch-in from other schemes) |
3:00 PM |
The updated cut-off times reflect SEBI's emphasis on the realisation of funds, impacting transaction timings for mutual fund investments and redemptions up to Rs. 2 lakh.
SEBI’s new rules for mutual fund cut-off
In India, SEBI (Securities and Exchange Board of India) has stipulated different timings for when mutual fund transactions (buying or redeeming units) are processed. These timings vary based on the type of fund. Let’s check out the latest cut-off times for redemption:
- Redemption: 3:00 P.M.
- Overnight funds: 1:30 P.M.
- Liquid funds: 1:30 P.M.
- All other types of funds: 3:00 P.M.
The above rules are based on 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. It must be noted that these rules came into effect on February 1, 2021.
Moreover, for your purchase of mutual fund units to be processed at the NAV of the same day, the money must be successfully transferred and available in the mutual fund's bank account before the cut-off time. This rule was already applied to liquid funds and overnight funds, and now, it applies to all types of mutual funds.
How does mutual fund cut-off time work?
Here are the general rules for some of the common types of schemes:
- Liquid and overnight funds: These are low-risk debt funds that invest in very short-term securities. The cut-off time for purchase of these funds is 1:30 p.m., and for redemption is 3 p.m. If you place your order before 1:30 p.m., you will get the previous day’s NAV. If you place your order after 1:30 p.m., you will get the same day’s NAV.
- Equity and debt funds (except liquid and overnight funds): These are funds that invest in stocks, bonds, or a mix of both. The cut-off time for purchase of these funds is 3:00 p.m. If you place your order before 3:00 p.m., you will get the same day’s NAV. If you place your order after 3:00 p.m., you will get the next day’s NAV.
- ELSS tax-saving funds: These are equity funds that offer tax benefits under Section 80C of the Income Tax Act. The cut-off time for purchase and redemption of these funds is the same as equity and debt funds, i.e., 3:00 p.m.
How cut-off time for equity mutual fund works?
The cut-off time for equity mutual funds in India is generally 3 PM. This is the deadline for placing purchase or redemption orders to be processed at the current day's Net Asset Value (NAV). If you submit your application after this time, your order will typically be processed at the next day's NAV.
However, it's important to note that specific mutual fund schemes may have slightly different cut-off times. Some schemes, especially those investing in less liquid assets, might have earlier cut-off times. Additionally, different investment platforms may have their own cut-off times for placing orders.
To ensure accurate information, it's advisable to:
- Check with the Mutual Fund House: Directly contact the mutual fund house or refer to their website for the exact cut-off time of the specific scheme you're interested in.
- Consult Your Investment Platform: Your investment platform will provide information about their specific cut-off times and the process for placing orders.
Redemption Processing Time
The time taken to process a redemption request and credit the funds to your bank account can vary depending on several factors, including the type of fund, the redemption amount, and the specific procedures of the mutual fund house. Generally, you can expect the following processing times:
- Liquid Funds: 1-2 working days
- Equity, Debt, and Conservative Hybrid Funds: 2-4 working days
However, bank holidays and other unforeseen circumstances may impact processing times.
The Securities and Exchange Board of India (SEBI) plays a crucial role in regulating the mutual fund industry in India. It sets guidelines and regulations to ensure fair practices, investor protection, and market integrity. These regulations include the establishment of cut-off times for mutual fund transactions.
By understanding these nuances and staying informed about the latest regulations, investors can make informed decisions and optimize their investment strategies.
Why is mutual fund cut off so important?
According to the regulations, AMCs must disclose the NAVs of all schemes at the market's close, essentially marking the end of the trading day. Consequently, investors attach great importance to submission deadlines. To secure the NAV for a specific business day, investments must be made before the cut-off time.
Most mutual fund schemes set a 3 PM deadline for buy transactions, excluding liquid fund schemes. If you invest by 3:00 PM, you'll receive the NAV for that day. Submitting applications after the deadline still allows acceptance by the AMC. However, in such cases, investors receive the NAV for the following business day. These cut-off time regulations also extend to redemptions.
SEBI Mutual Fund regulations mandate all mutual funds to adhere to the cut-off period, except liquid fund schemes. These guidelines specify the utilisation of future NAV to determine the distribution of mutual fund units, calculated based on the closing market value of scheme-owned securities, which is then declared at day's end.
What is NAV in mutual funds?
NAV stands for Net Asset Value. It is the per-unit or per-share value of a mutual fund scheme. It is calculated by subtracting the mutual fund’s liabilities and expenses from its total asset value and dividing the result by the number of outstanding units.
NAV is an indicator of the fund’s performance and reflects the market value of its underlying assets. NAV changes every day based on the movement of the market prices of the assets in the fund’s portfolio.
Relationship between cut-off time and NAV
The relationship between cut-off time and NAV is that the cut-off time determines which NAV will be applicable for your mutual fund transaction.
If you place your order before the cut-off time, you will get the NAV of the same day or the previous day, depending on the type of fund.
If you place your order after the cut-off time, you will get the NAV of the next business day. This means that the cut-off time can affect the cost and returns of your mutual fund investment.
NAV Based on Realisation of Funds
NAV Based on Realisation of Funds refers to the calculation of a mutual fund’s Net Asset Value (NAV) only after the mutual fund firm has realised the actual payment from investors. This means that the NAV applicable for transactions is determined based on when the funds are credited to the mutual fund’s account. This approach ensures accurate NAV allocation, reducing discrepancies.
Key points:
- NAV is applied after funds are realised by the mutual fund firm.
- Ensures accurate reflection of investor payments.
- Reduces the risk of incorrect NAV allocation.
- Commonly applies to purchases through modes like cheque or demand draft.
Applicable NAV for mutual funds transactions
It is worth mentioning that there are separate rules for determining the applicable NAV for mutual fund transactions (excluding liquid/overnight funds). These rules are specifically based on when you submit your transaction and when the funds are available. Let’s understand this better through the table below:
Time of receipt of transaction at official points of acceptance |
Time when funds are available for utilisation |
Applicable NAV |
Up to 3.00 P.M. |
By 3:00 P.M. |
You will get the NAV of the same business day. |
Up to 3.00 P.M. |
After 3:00 P.M. |
You will get the NAV of the next business day when the funds are available before 3:00 P.M. |
After 3.00 P.M. |
By 3:00 P.M. |
You will get the NAV of the next business day. |
After 3.00 P.M. |
After 3:00 P.M. |
You will get the NAV of the subsequent business day when the funds are available before 3:00 P.M. |
Note: For liquid and overnight funds, the cut-off time is 1:30 P.M. If both the transaction and funds realisation happen before 1:30 P.M., the NAV of the previous day will be applied.
To understand this better, let us study a hypothetical example.
Say an investor makes a lumpsum investment of Rs. 50,000 (other than liquid and overnight funds). The different scenarios with varying NAVs are shown below:
Application made |
Funds received |
NAV applicable |
Before 3:00 P.M. on May 10th |
Before 3:00 P.M. on May 10th |
May 10th, 2024 |
After 3:00 P.M. on May 10th |
Before 3:00 P.M. on May 11th |
May 11th, 2024 |
Before 3:00 P.M. on May 10th |
After 3:00 P.M. on May 10th |
May 11th, 2024 |
After 3:00 P.M. on May 10th |
After 3:00 P.M. on May 12th |
May 15th, 2024 (next business day due to the weekend) |
Similarly, for SIPs, the units will be allocated on the scheduled date (e.g., 10th of each month) only if the payment is reflected in the mutual fund's bank account before 3:00 P.M. that day. Otherwise, the NAV of the next business day will apply.
For purchases in liquid and overnight funds, the T-1 NAV (previous day's NAV) would be allotted if the transaction and credit are received within the cut-off time of 1:30 P.M. (does not include holidays and weekends).
Furthermore, when switching from one scheme to another, the applicable NAV is determined as follows:
Transaction Type |
Time of Receipt at Official Points of Acceptance |
Time When Funds are Available |
Applicable NAV |
Switch Out |
Up to 3:00 P.M. |
N/A |
Same business day |
Switch In |
N/A |
By 3:00 P.M. |
Business day on which the funds are received in the switch-in scheme before the cut-off time. |
Which NAV is applicable on switching mutual funds?
When switching between mutual fund schemes, the applicable NAV depends on the time at which the switch request is submitted and processed. The cut-off time plays a crucial role here, similar to buying or redeeming mutual fund units. If the switch request is made before the cut-off time, generally 3 PM for equity and debt funds, the same day’s NAV is applicable. However, if the request is submitted after the cut-off, the NAV of the next business day will be applied.
Additionally, the switch involves two transactions – redemption from one scheme and purchase into another. The NAV for redemption is determined based on the time the request is made, while the NAV for the new purchase depends on the realisation of funds from the first transaction. Hence, being aware of the cut-off time and payment realisation is essential when switching mutual funds to ensure optimal returns and avoid timing mismatches.
Transaction wise NAV applicability matrix
The Transaction-wise NAV Applicability Matrix outlines the specific cut-off times for different types of mutual fund transactions. NAV applicability varies based on transaction type (purchase, redemption, switch) and fund category (equity, debt, or liquid). Meeting the cut-off time ensures the NAV of the same day, while transactions post-cut-off get the next business day's NAV. Here's a basic outline:
Transaction Type |
Fund Type |
Cut-off Time |
Applicable NAV |
Purchase/Switch |
Equity/Debt Funds |
3 PM |
Same day’s NAV |
Purchase |
Liquid Funds |
1:30 PM |
Same day’s NAV |
Redemption |
Liquid Funds |
3 PM |
Same day’s NAV |
Purchase |
Cheque Payment |
N/A |
NAV on fund realisation |
How to get same day’s NAV in mutual funds?
According to SEBI rules, the NAV for mutual fund units is allotted based on when the funds are realised (received) in the mutual fund's bank account. The cut-off time for this is 3:00 P.M. However, for ordinary retail investors, it's almost impossible to transfer money quickly enough to reach the fund house before 3:00 P.M. That’s because most investors use net banking or pre-scheduled bank debits (like in SIPs), which usually don't transfer funds that quickly. As a result, most investors cannot get the same day's NAV, regardless of how fast they try to transfer their money.
Now, below are some possible solutions following which you can overcome the issue of delayed NAV allotment due to fund realisation timing:
- Solution I: Invest directly through AMC’s website/app
AMCs (Asset Management Companies) often have direct integrations with major banks. This means that if you use AMC's website or app to make your investment, the funds might be received immediately. This immediate receipt increases the chances of getting the same day's NAV. - Solution II: Use third-party platforms
If you use a third-party platform (like BSE or NSE) to invest, they often have an earlier cut-off time (e.g., 2:30 P.M.) due to operational requirements. Transactions done before this time on these platforms will be processed similarly to those done directly on an AMC’s website. - Solution III: Invest close to the cut-off time
If you want to invest close to the cut-off time (like within the last half hour before 3:00 P.M.), using AMC's direct website can still be your best bet. This solution ensures that your funds are received on the same day, and thus, you can get the same day's NAV.
Conclusion
Understanding the mutual fund cut-off time is essential for navigating your investments effectively. By knowing the deadline (typically 3:00 PM), you can ensure you receive the desired NAV for your purchase or redemption. Remember, orders after the cut-off time are processed at the next business day's NAV, which can fluctuate. To maintain control and potentially benefit from favorable NAVs, submit your transactions well before the cut-off. Make sure to consult your investment platform or advisor for any specific variations in their cut-off times or cancellation policies.
