Mutual Fund Cut Off Time: Why is it important for you to know?
Mutual Fund Cut Off Time: Introduction
Mutual Fund investments are subjected to the constantly changing environment of the stock market. Earlier, the investors had to submit their applications at the offices of RTAs (Registrars and Transfer Agents) or AMCs (Asset Management Companies). That's not it, they had to make sure that their application was submitted prior to the MF cut off time. It was only then you'd be able to purchase at low and sell at a high market. Simply put, you could get the same-day NAV only if you submit your application before the MF cut-off time. However, things have changed now. But how? What's the relevance of cutoff time in today's mutual fund scenario? Let's find out!
Mutual Fund Cut Off Time Today
According to the latest revised NAV rules by SEBI, the cut off time for mutual funds is of less importance. This means, that starting from February 2021, the MF houses are allowed to allocate units to the investors only after the realization of funds. This rule is applicable for purchasing both equity and debt MFs. Therefore, even if you submit your mutual fund purchase application before cut-off time, you will be allotted desired units after the realization of funds. Understand it in this way:
The net asset value applicable on your MF transaction will be based on what time the mutual fund house receives your fund.
Note that, this rule earlier was only applicable on MF investments of a minimum of 2 lakh or more. So, for smaller investments, the allotment was made based on the same day NAV after submitting the application before MF cutoff time. It's worth noting that the rules of NAV applicability are the same for overnight and liquid funds.
SEBI (Securities and Exchange Board of India) announced this change in September 2020. According to the circular dated December 2020, this latest revision was to be executed on 1st January 2021. However, it got pushed away and was later implemented on 1st February 2021.
Cut Off Time for Mutual Funds in India
| Type of Mutual Fund Scheme | Cut-off Time |
| Overnight Mutual Funds | 1:30 PM |
| Liquid Mutual Funds | 1:30 PM |
| MF Redemption | 3:00 PM |
| Other Scheme | 3:00 PM |
As you can see, the MF redemption cut off time is different from the liquid fund cut off time and cut off time for overnight mutual funds. Also, reiterating the fact that the cut-off time of mutual funds in India is based on the fund realization by AMCs.
NAV and the MF Cut Off Timing
For those who don't know, the performance of a mutual fund is reflected through the changes in its net asset value. Because the market value of MF securities keep changing, the net asset value of mutual fund schemes that invest in such securities also keep fluctuating on a daily basis.
Note that the NAV or Net Asset Value of MFs is declared at the end of the trading day when the market is closed. So, the NAV of MF determines the price at which your units will be purchased or sold. And the NAV you'll be allotted depends entirely on the time you purchase or redeem a mutual fund.
Why is Mutual Fund Cut Off Important for the Investors?
As per SEBI regulations, the mutual fund houses announce the NAV or Net Asset Value of all the mutual funds after the closing of the market. In other words, they announce the NAV at the end of the day. This is the reason why cut off time for submitting MF applications is very important for the investors.
So, if you want to have the end-of-day NAV of any particular day, you need to make the investment before the cut-off time. As discussed above, the cut-off time for purchasing most MFs schemes is 3:00 PM. This simply means, that if you invest before this time, you will get the NAV for that day. However, this is not applicable for liquid mutual funds.
Also, if you make an investment after the cut-off timing, your application will be received on the same day, but you'll get theNAV applicable to the next business day. Note that the cut-off timing rules are similar in the case of MF redemption or withdrawal.
Bottom Line
According to mutual fund regulations by SEBI, the cut-off timing is applicable to all the mutual funds available in the market, except for the liquid funds. As per the new guidelines, the allotment of MF units is based on the applicable NAV. And the NAV is based on the value of securities at the end of the trading day. We hope this information on mutual funds cut off timing helps you in making smart investments.
What is cutoff time in mutual fund?
The mutual fund transactions like purchasing and selling depend on the prevailing NAV of the selected scheme. To make the operational process straightforward and uniform, SEBI prescribed mutual fund cut-off timings for all types of mutual fund schemes. This is the time before which you need to submit your application in order to avail of the NAV of the same business day. Generally, the cut-off time for all MF schemes except Liquid funds is 3:00 PM in India.
Which day NAV is applicable?
According to SEBI regulations implemented from Feb, 2021, the applicable NAV for the mutual fund transactions is subject to fund realization by the fund houses based on the cut-off timing.
What is the best time to buy mutual funds?
There is no such thing like the best or right time for investing in mutual funds. You can make an investment any time you want. But the deal is, that it is always a good idea to purchase MF units at a lower NAV. Not only will it maximize your returns, but will also help you achieve your financial goals faster.