What is the Mutual Fund cut-off time?

Mutual fund cut-off timing is the deadline for investors to submit their buy or sell orders on a specific business day.
Mutual fund cut-off time
4 mins
17 Feb 2024

Mutual funds are one of the most popular investment options in India, offering a variety of schemes to suit different risk profiles and goals. However, investing in mutual funds is not as simple as buying or selling stocks. There are certain rules and regulations that govern the timing and valuation of mutual fund transactions. One of these is the mutual fund cut-off time, which determines the NAV (Net Asset Value) applicable for your purchase or redemption of mutual fund units.

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.

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.

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.

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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.

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