Mutual Fund Cut Off Time

Learn about mutual fund cut-off time and its impact on NAV.
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Mutual Fund Cut Off Time
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4 mins read
18 Apr 2024

Understanding mutual fund cut-off time is crucial before investing in these popular financial instruments. Unlike stocks, mutual fund purchases and redemptions are subject to specific timings and valuations set by SEBI (Securities and Exchange Board of India). This article dives into the meaning of mutual fund cut-off time, explores the SEBI regulations surrounding it, and explains 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 is based on the Indian Standard Time (IST) and follows the working days of the Indian stock market. The cut-off time is different for different types of mutual fund schemes and modes of payment.

Cut-off timings are the deadlines for placing orders for buying or selling mutual fund units on a given day. Depending on the type of scheme and mode of payment, there are different cut-off timings for different transactions. If you place your order before the cut-off time, you will get the NAV of the same day. If you place your order after the cut-off time, you will get the NAV of the next business day.

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 incl. switch-ins)

1:30 PM

Liquid Funds and Overnight Funds (Redemption incl. switch-outs)

3:00 PM

All other schemes (Subscription incl. switch-ins)

3:00 PM

All other schemes (Redemption incl. switch-outs)

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

SEBI, the market regulator, has introduced new rules for mutual fund cut-off time, effective from 1st February, 2021.

According to the new rules, the cut-off time is no longer relevant for the purchase of mutual fund units, except for liquid and overnight funds. Instead, the NAV applicable for the purchase of mutual fund units will depend on the realization of funds, i.e., when the fund house receives the money from the investor.

This means that even if you place your order before the cut-off time, you will not get the same day’s NAV unless the fund house receives the money before the cut-off time.

This rule is applicable for all types of mutual fund schemes, irrespective of the amount of investment. The new rule aims to bring uniformity and transparency in the mutual fund industry and protect the interests of the investors.

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.

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.

Applicable NAV for mutual funds transactions

The applicable NAV for mutual funds transactions covers all purchase transactions except for Liquid and Overnight Funds, including Switch-In transactions across all mutual fund schemes. The following rules determine the NAV, regardless of the investment amount:

  • If the purchase transaction application is received by 3:00 PM on a business day, with funds available for utilisation by the same time, the NAV of that day applies.
  • If the transaction is received by 3:00 PM, but funds are available for utilisation after that time on the same day, or on a subsequent business day, the NAV of the subsequent business day applies.
  • For transactions received after 3:00 PM on a business day, with funds available for utilisation by the same time, the NAV of the following business day applies.
  • If the transaction is received after 3:00 PM, with funds available for utilisation after that time on the same day or the next business day, the NAV of the subsequent business day, when funds are realised before 3:00 PM, applies.

Importance of cut-off time for mutual funds on transactions

The cut-off time for mutual funds is important for investors as it can affect the cost and returns of their investments. By placing the order before the cut-off time, investors can get the benefit of the NAV of the same day or the previous day, depending on the type of fund. This can help them to buy low and sell high and maximise their profits.

Even with the new SEBI rules the cut-off time is relevant for the purchase of mutual fund units since the NAV will depend on the realization of funds. Therefore, investors need to ensure that they transfer the money to the fund house as soon as possible after placing the order, to get the best possible 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.

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Frequently asked questions

What is mutual fund cut-off time?

Mutual fund cut-off time is the deadline for placing orders for buying or selling mutual fund units. It determines which day's NAV (Net Asset Value) will be applicable for your transaction. The exact cut-off time depends on the type of mutual fund scheme.

What happens if I miss the cut-off time?

If you miss the cut-off time, your order will be processed on the next business day. You will get the NAV of the next business day, not the same day. This may affect your returns, especially if the market is volatile.

Can I cancel or modify the investment request after the cut-off time?

No, you cannot cancel or modify the investment request after the cut-off time. Once you place an order, it is final and binding. You can only cancel or modify the order before the cut-off time.

Which day’s NAV is applicable?

This depends on the type of mutual fund scheme and its cut-off time. As per the new SEBI rules, the applicable NAV for purchase transactions is subject to the realisation of funds, i.e., when the fund house receives your money. This rule is applicable for all schemes.

What is the best time to buy mutual funds?

The best time to buy mutual funds depends on your investment objective, risk appetite, and market conditions. There is no fixed rule or formula for timing the market.

Can I redeem mutual fund after 3pm?

No, mutual fund redemption requests made after 3pm are processed on the next business day.

What is the cut off time for mutual fund off market orders?

The cut-off time for mutual fund off-market orders is 3:00 pm.

Can I buy mutual funds after 4pm?

No, mutual fund purchases made after 4pm are usually processed on the next business day.

At what time SIP is deducted?

SIPs (Systematic Investment Plans) are typically deducted in the morning on the specified date chosen by the investor, usually around 9:00 AM to 10:00 AM.

What if I buy MF on Sunday?

If you buy mutual funds on a Sunday or any non-business day, the transaction will be processed on the next business day, with the NAV of that day applied.

Why does cut-off time matter in mutual funds?

The cut-off time determines the Net Asset Value (NAV) that you will receive when buying or selling mutual fund units. It acts like a deadline for transactions at the day's NAV. Submitting your order before the cut-off ensures you get the current NAV, while orders after it are processed at the next day's NAV, which could be higher or lower.

Can I cancel or modify the investment request after the cut-off time?

Generally, no. Once the cut-off time has passed, your order is queued for processing at the next day's NAV. Some platforms might offer limited cancellation windows, but it's best to check their specific policy beforehand. To ensure control over your investment price, aim to submit your orders well before the cut-off time.

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Bajaj Finance Limited (“BFL”) is a Non-Banking Financial Company carrying the business of acceptance of deposits, providing lending solutions to Retail & Corporate customers, and is a Corporate agent of various insurance Companies. BFL is also registered with the Association of Mutual Funds in India (“AMFI”) as a distributor of third party Mutual Funds (shortly referred as ‘Mutual Funds’).

BFL does NOT:

(i) provide investment advisory services in any manner or form;

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(iii) carry customized/personalized suitability assessment;

(iv) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.


In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on ‘As-is’ basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme /Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities. The NAV will inter-alia be exposed to Price / Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other / better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

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