Sebi to toughen MF NAV norms

This means that the price at which an investor buys an MF unit will be the closing NAV of the day in which the fund realises the purchase amount. This new norm is set to replace the present rules relating to NAVs.

Currently, there are two sets of rules governing the issue. If an investor makes a purchase before 3 pm on a particular day, the closing NAV of the same trading day is applicable to him. If he comes in after 3 pm, then the NAV of the next trading day becomes applicable.

These norms were fixed in March 2004 to tackle the problem of playing on ‘‘stale’’ NAVs, where investors would purposely take the benefit of the previous day’s NAV to enter a scheme, and then cash out at a higher NAV, typically on the same day. The latest change toughens these norms further.

Confirming this, a senior Sebi official said: ‘‘We are led to believe that there are some people still trying to time the market, while entering the it through the equity MF route. This is even after making uniform cut off timings and time-stamping necessary. To bring about uniformity in operations, we are thinking of making NAV applicable to the date of realisation for mutual fund schemes across the board’’.

‘‘However, there has been no conclusive decision on this. Things are still being discussed,’’ the official added.

But the mutual fund industry is viewing this proposal with caution.

Krishnamurthy Vijayan, CEO, JM Mutual Fund said: ‘‘NAV on the date of realisation would only make sense in a real time gross settlement (RTGS) regime. At present, investors from smaller centres bear the brunt as banks take anything between 15-21 days to clear a outstation cheque’’.

‘‘Although a particular investor invests money on a day wanting to time the market, he does not have any idea when his account will be debited.