As of April 30, 2026, the Indian mutual fund industry's Assets Under Management (AUM) stood at approximately ₹81.92 lakh crore, compared with ₹73.73 lakh crore at the end of March 2026. This reflects an increase of around 11.1% within a month. This represents more than a threefold increase over five years.
However, as more investors enter the market, understanding key mutual fund concepts becomes crucial for making informed decisions. Two fundamental aspects that often confuse new investors are Net Asset Value (NAV) and Expense Ratios.
What is Net Asset Value (NAV)?
NAV is essentially the price of one unit of a mutual fund. It’s calculated by dividing the total value of the fund’s assets minus its expenses by the number of units. Simply put, NAV tells individuals how much each unit of the fund is worth on a given day.
How is NAV Calculated?
The formula for calculating NAV is:
NAV = (Market Value of All Securities - Expenses) / Number of Outstanding Units
For example, if a mutual fund has securities worth ₹100 crore, expenses of ₹5 crore, and 5 crore outstanding units, the NAV would be:
NAV = (₹100 crore - ₹5 crore) / 5 crore = ₹19 per unit
How is the Net Value of an Asset Calculated?
There are two types of net asset value calculation. These are:
General Calculation of the Net Value of Assets
The general net value of assets refers to the value derived from the cumulative worth of individual assets held within the portfolio. It is calculated based on the market value of securities and other holdings within the scheme.
This value may change due to fluctuations in market prices of underlying assets and is updated based on prevailing market conditions.
Daily Net Valuation of Assets
Mutual fund investment companies evaluate the total value of their portfolio on a daily basis after the stock market closes at 3:30 pm. The market reopens the next day with reference to the previous day’s closing prices.
Fund houses deduct applicable expenses from the total value of assets to arrive at the net valuation of assets for the day, using the prescribed valuation method.
How is the Net Value of an Asset Relevant for Investors?
Most investors may consider the net value of an asset similar to the price of an equity share. However, the underlying calculation differs.
The price of an equity share is generally influenced by liquid market demand and supply factors, whereas net asset value considers both liquid and non-liquid assets of a fund or entity. In this context, NAV reflects the aggregated value of all assets after accounting for liabilities.
Net value of assets may provide investors with an indication of the overall valuation of a fund, which can assist in evaluating fund-related information and investment decisions.
Role of NAV in Fund Performance
Some investors may consider new fund offers (NFOs) to be comparatively inexpensive due to their initial NAV level, often set at a base value such as ₹10. However, NAV represents the value of underlying securities and accumulated changes in the portfolio since scheme inception.
Two mutual fund schemes may have similar underlying portfolios, but different NAV levels due to differences in launch timing and accumulated market movements. Despite this variation, the intrinsic value of both schemes may remain aligned with their underlying assets.
Therefore, NAV alone may not serve as a complete indicator of fund performance. Investors may consider additional parameters such as historical performance trends, portfolio composition, and expense ratio when reviewing mutual fund schemes.
Cut-Off Timings and Applicable NAV for Mutual Fund Transactions
Type of Scheme | Transaction Type | Cut-off Timing |
Liquid & Overnight Funds
| Subscription (including Switch-in) | 1:30 p.m. |
Redemption (including Switch-in) | 3:00 p.m. | |
All Other Schemes (Equity, Debt, Hybrid, etc.)
| Subscription (including Switch-in) | 3:00 p.m. |
Redemption (including Switch-in) | 3:00 p.m. |
What is Expense Ratio?
The Total Expense Ratio (TER) is the annual fee that mutual funds charge investors for managing their money. It covers various operational costs such as:
- Fund management fees
- Administrative expenses
- Marketing and distribution costs
- Legal and compliance fees
- Registrar and transfer agent fees
How is Expense Ratio Calculated?
The Total Expense Ratio (TER) represents the percentage of a mutual fund’s average assets that is used to cover the total costs of running and managing the fund.
Expense Ratio = (Total Expenses / Total Assets) × 100
For example, if a fund has total expenses of ₹3 crore and average assets of ₹100 crore, the expense ratio would be:
Expense Ratio = (₹3 crore / ₹100 crore) × 100 = 3%
TER is deducted daily from the fund's assets before the NAV is declared. Therefore, the NAV one sees is already net of expenses.
SEBI Regulations on Expense Ratios
The Securities and Exchange Board of India (SEBI) has established maximum limits for mutual fund expense ratios based on the fund's AUM. As of 2026, these
AUM Slab | Maximum Base Expense Ratio (BER) for Equity-Oriented Schemes | Maximum Base Expense Ratio (BER) for Other-than-Equity-Oriented Schemes |
Up to ₹500 crore | 2.10% | 1.85% |
₹500 crore to ₹750 crore | 1.90% | 1.65% |
₹750 crore to ₹2,000 crore | 1.60% | 1.40% |
₹2,000 crore to ₹5,000 crore | 1.50% | 1.25% |
₹5,000 crore to ₹10,000 crore | 1.40% | 1.15% |
₹10,000 crore to ₹15,000 crore | 1.35% | 1.10% |
₹15,000 crore to ₹20,000 crore | 1.30% | 1.05% |
₹20,000 crore to ₹25,000 crore | 1.25% | 1.00% |
₹25,000 crore to ₹30,000 crore | 1.20% | 0.95% |
₹30,000 crore to ₹35,000 crore | 1.15% | 0.90% |
₹35,000 crore to ₹40,000 crore | 1.10% | 0.85% |
₹40,000 crore to ₹45,000 crore | 1.05% | 0.80% |
₹45,000 crore to ₹50,000 crore | 1.00% | 0.75% |
Above ₹50,000 crore | 0.95% | 0.70% |
How Expense Ratio Affects Your Investments
The expense ratio represents the cost charged for managing a mutual fund scheme and may have an impact on overall investment outcomes. It is expressed as a percentage of the scheme’s assets.
For example, if an investment of ₹2,00,000 is placed in a fund with a 1.5% expense ratio, the annual cost may be ₹3,000. If the fund generates a return of 11% and the expense ratio is 1.5%, the net return may be around 9.5% before other considerations.
However, the expense ratio alone may not determine overall scheme performance. Other factors, such as portfolio management approach, investment strategy, and historical performance, may also be relevant in fund evaluation.
How to Check NAV and Expense Ratio
Finding NAV Information
Individuals can check a fund's NAV through:
- AMC websites
- Financial websites like Value Research
- AMFI (Association of Mutual Funds in India) website
- Fund factsheets provided by AMCs
Finding Expense Ratio Information
Expense ratios can be found in:
- Fund factsheets
- Scheme Information Documents (SIDs)
- AMC websites
- Investment platforms
Understanding When NAV and Expense Ratio Matter
NAV and expense ratio can serve as useful indicators to evaluate how a mutual fund functions and what it may cost over time. Here's how they play a role in different contexts
When NAV Becomes Relevant
- Systematic Investment Plans (SIPs): Regular investments benefit from fluctuating NAVs, as lower NAVs allow acquisition of more units and higher NAVs fewer units resulting in rupee cost averaging over time.
- One-Time Investments: Investors sometimes refer to past NAV trends for context, but NAV alone should not be used to time the market or assess performance.
When Expense Ratio Becomes Relevant
- Long-Term Horizon: Over several years, cumulative costs can impact overall returns. Hence, funds with lower expense ratios may lead to comparatively higher overall returns.
- Index-Based Schemes: Since these track benchmark indices passively, a lower expense structure may contribute to improved tracking efficiency.
Conclusion
NAV and expense ratio are fundamental metrics used in mutual fund disclosures. While NAV reflects the value of a scheme's assets after liabilities, the expense ratio captures the costs involved in operating the fund. Both measures provide different insights into a mutual fund and are generally considered alongside other factors such as investment strategy, risk profile, portfolio composition, and historical performance. Understanding how these metrics function may assist investors in interpreting mutual fund information more effectively and evaluating scheme-related data in a structured manner.
Frequently Asked Questions
Does a higher NAV mean the fund is expensive?
No, NAV simply represents the current value of one unit of the fund. It doesn't indicate whether the fund is expensive or cheap.
How often does the NAV change?
For most mutual funds, NAV is calculated and updated at the end of each business day based on closing market prices of the securities in the portfolio.
Are expense ratios fixed throughout the life of my investment?
No, AMCs can change expense ratios within SEBI's prescribed limits. They typically revise them based on factors like fund size, competition, and operating costs. It may be useful for investors to periodically check the fund's expense ratio.
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