Many investors get confused between trading hours and cut-off timings. While trading hours are the allotted periods for buying or selling mutual fund units, cut-off timings determine the Net Asset Value (NAV) at which you can buy or sell mutual fund units. Cut-off timings are different for different types of funds.
Mutual Fund investments are driven by fluctuations in the stock market. Investors had to submit applications at offices of Asset Management Companies (AMCs) or their Registrar and Transfer Agents (RTAs). You had to submit the application before the cut-off time. The cut-off time determines which day’s NAV will be applicable to your Mutual Fund transaction.
Cut-Off Time for Mutual Fund Transactions
As per a circular dated September 17, 2020, that Securities and Exchange Board of India (SEBI) had said that mutual fund units will be allotted at the NAV applicable on the day of realization of funds.
Here, ‘realisation of funds’ means that the NAV applicable on your transaction will depend on if the fund house has received your money or not.
While this was to be implemented from January 1, 2021, in circular SEBI/HO/IMD/DF2/CIR/P/2020/253 dated December 31, 2020, Sebi had said that the implementation was being pushed by a month.
This will now be applicable from February 1, 2021.
| Type of Schemes | Cut-off Time in IST |
| Liquid Funds and Over Night Funds (Subscription including switch-ins) | 1:30 PM |
| Liquid Funds and Overnight Funds (Redemption including switch-ins) | 3:00 PM |
| All other schemes (Subscription including switch-ins) | 3:00 PM |
| All other schemes (Redemption including switch-ins) | 3:00 PM |
SEBI New Rule for Mutual Fund Cut Off
SEBI in its circular no. SEBI/HO/IMD/DF2/CIR/P/2020/175 as on September 17, 2020, announced the change in cut-off timings. The rule has been brought to effect from February 1, 2021, in accordance with circular no. SEBI/HO/IMD/DF2/CIR/P/2020/253 dated December 31, 2020.
According to the New Rule, the applicable NAV in respect of the purchase of units of a mutual fund scheme is subject to the realization of funds. It means the availability of funds in the bank account of the mutual fund house before purchase transactions. The rule is applicable to all investments irrespective of the amount of investment. It covers all mutual fund schemes except Liquid funds and Overnight Funds.
Importance of Mutual Fund Cut Off Time
According to the SEBI Mutual Fund Regulations, fund houses declare the NAVs of all mutual fund schemes after the markets close. In simple terms, they declare the NAV at the end of the trading day. This makes the cut-off time for the submission of applications so important for investors. In order to get the end-of-day NAV of a particular business day, you must invest before the cut-off time.
The cut-off time for most mutual fund schemes is 3:00 PM for purchase transactions. This timing, however, is not applicable to liquid fund schemes. This means if you invest till 3:00 PM you will get NAV applicable for the day. In case you submit the application after the cut-off time, the mutual fund company will accept your application. But in such cases, you will get the NAV of the next business day. The cut-off time rules apply similarly for redemptions too.
The cut-off time is applicable on all mutual funds as per SEBI Mutual Fund Regulations. It does not apply to liquid fund schemes. According to the guidelines allotment of mutual fund units is on the basis of prospective NAV. The NAV is based on the closing market value of the securities held in the respective schemes. It is declared at the end of the day.
What Will Change for My SIP Orders?
There are primarily two ways to pay for a SIP instalment: AutoPay and BSE Mandates. Here’s how the NAV and order completion dates will change after February 1, 2021:
AutoPay:
For investors with SIP on AutoPay, there will be no change in the applicable NAV date and order completion of your SIP orders.
BSE Mandates:
For investors with BSE mandates (Biller and One-time mandates), until now BSE was deducting the SIP instalment amount from your bank account directly on the SIP due date and the order completion was happening on T+1 day.
Due to the same-day NAV change implemented from February 1, 2021, the instalment amount will be deducted on T day by BSE and fund realization at BSE end is T+ 2/3 business days and the expected completion date for these orders will change from T+1 business days to T+ 4/5 business days from BSE end.
Hence, the order completion date and NAV date is pushed for all BSE mandates( Biller and One-time mandates).
Can I redeem mutual fund after 3PM?
Yes, you can redeem your mutual fund investments anytime. However, the applicable NAV will vary depending on the time of redemption. If redemption is before 3pm, the same business day NAV will be applicable. In case the redemption is after 3pm, NAV of the next business day is applicable.
At what time is NAV calculated?
The Cut Off Time For All Mutual Fund Schemes, Except For Liquid And Overnight Funds, Is 3pm. NAV Calculation Happens After The Market Closes. Thus, If You Invest Before 3pm, You Will Get The Same Day’s NAV.
Conclusion
For all funds except liquid funds, if you buy/invest in a mutual fund before the cut-off timing, you can receive the NAV of the same day. To get the same day’s NAV, your money should reach the AMC on the same day too. In case you made a transaction before the cut-off timing and due to some reason the money did not reach the fund house, you may get the next day’s NAV.
Disclaimer : ll mutual funds are subject to market risk. The degree of risk may vary depending on the type of mutual fund. Because of market risk, the mutual fund NAV may rise or fall depending on the market forces affecting the securities.