Mutual fund cut-off time in India
|Nature of scheme||Subscription||Redemption|
|Liquid and Overnight Funds||1:30 PM||3:00 PM|
|Any other type of mutual fund scheme||3:00 PM||3:00 PM|
This article covers:
- What Is Cut-Off Time In Mutual Fund
- Importance of Mutual Fund Cut-Off Time
- SEBI New Rule for Mutual Fund Cut Off
- Mutual Fund Cut-Off Time- Quick Summary
- Mutual Fund Cut-Off Time- FAQ
What Is Cut-Off Time In Mutual Fund
The application for Mutual fund purchase is received until the cut-off time of the business day, which is 3:00 PM. The funds can be accessible for purchase or redemption by 3:00 PM of the same business day. The submission must be completed at the official place of acceptance on any business day.
- Anyone interested in investing in a particular mutual fund scheme has to do it before the mutual fund cut-off time, which is 3:00 PM IST. By doing this, you can take advantage of the NAV announced on that particular day, and your shares or units will be issued based on that particular amount.
- If your application is registered a little late, although you will get accepted, you won’t be able to take advantage of that day’s NAV. Due to this particular reason, mutual fund cut-off time is extremely important for investors.
- With the new NAV rules implemented by SEBI, the mutual fund cut-off time has become less relevant. Starting from February 1, 2021, the fund houses that control mutual fund schemes are allowed to issue the units to the investors after the realization of the funds (realization of the funds means when the fund houses handling the mutual fund schemes have already received the money from the investors).
- You also need to note that this particular rule implemented by SEBI only applies to debt mutual funds and equity-oriented mutual fund schemes. Now, if you apply or submit your application even before the mutual fund cut-off time, your funds will only be allocated after the fund house has received the money from your side.
- Previously the new rule was applicable for 2 lakhs and above investments. Also, the units allocated to retail investors (with smaller investment amounts) were given on the same day they submitted the application before the mutual fund cut-off time.
Importance of Mutual Fund Cut-Off Time
Most mutual funds have a cut-off time of 3:00 PM on any normal business day. If you invest your money before 3:00 PM, you will take advantage of that particular day’s NAV. For liquid mutual fund schemes, this deadline is not applicable.
Similarly, if you want to sell your mutual fund units, then the same cut-off time will become applicable here. The units you are willing to sell will be sold according to the NAV of the same business day if you apply for it before 3:00 PM.
As mentioned earlier, SEBI is in charge of regulating the mutual fund. As per its rules, the fund houses that are offering mutual fund schemes need to announce their NAV or net asset value after the stock market has closed for the day.
Due to this particular reason, the cut-off time for mutual funds becomes an extremely important factor. If an investor wants to take advantage of a particular business day’s NAV, they must transfer their investment funds to the fund house before the cut-off time is over.
The following transactions are subject to the calculation of NAV based on the realization of Funds:
All transactions related to mutual fund purchase
SEBI’s realization of the fund rule is relevant for every kind of mutual fund transaction. Be it your first-time purchase or further acquisition, the realization of funds rule applies in all cases. Whether you are using lump sum investment or SIP, you must abide by the same.
Acquiring mutual fund units with the help of Inter-Scheme switching of investments
No matter how much is invested in a switch transaction, the rule applies even if it is under Systematic Transfer Plan (STP).
SEBI New Rule for Mutual Fund Cut Off
Mutual funds are regulated by the SEBI or Securities and Exchange Board of India. In September 2020, SEBI announced that the mutual fund cut-off timing is going to change through its circular no. SEBI/HO/IMD/DF2/CIR/P/2020/175. According to this new rule, the cut-off time for redemption is 1:30 PM for liquid and overnight funds. For the rest of the mutual fund schemes, the cut-off time is 3:00 PM.
This new regulation was implemented on 1st February 2021 which was announced through circular no. SEBI/HO/IMD/DF2/CIR/P/2020/253.
As per this new regulation, the realization of the fund will become the basis for the NAV to become applicable for the investors on the respective trading day. The funds should be transferred to the bank account of the fund house, and that is only when the investor will become eligible for holding the mutual fund units. Not to mention, this rule will be applicable to the investment of each and every size. With the exception of overnight funds and liquid funds, it includes every single fund scheme.
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Mutual Fund Cut-Off Time- Quick Summary
- The mutual fund cut-off time is the deadline by which an investor can submit an application for subscription or redemption of mutual fund units.
- For most mutual funds, the cut-off time is 3:00 PM on a normal business day. After this time, investors won’t be able to receive units based on the respective day’s NAV. They will have to wait for the next day (until the NAV for the next has been decided) or until the fund house has received the funds into their bank account from the investors.
- If you are dealing with overnight and liquid mutual funds, then remember that the mutual fund cut-off time for these types of mutual funds schemes is 1:30 PM on any normal business day.
- In case your fund house has received the funds on Friday after 3:00 PM, you will receive the mutual fund units on Monday evening when Monday’s NAV has already been announced by the respective fund house.
- Even if you are using SIP, you will have to follow the deadline to benefit from the same day.
- The mutual fund cut-off time is crucial for investors who want to take advantage of a particular day’s NAV.
- SEBI has implemented new rules for mutual fund cut-off timing, according to which the realization of funds will be the basis for NAV to become applicable for investors on the respective trading day. The new rule is applicable to all mutual fund transactions, regardless of the investment amount or mode of investment.
Mutual Fund Cut-Off Time- Frequently Asked Questions
1. What is the best time of day to buy mutual funds?
The NAV of a mutual fund which represents the value of every single mutual fund unit, gets adjusted at the end of every business day. Therefore, if you are thinking of investing in a mutual fund scheme, all you need to do is to keep in mind the mutual fund cut-off time.
2, What is the cut-off time for SIP purchase?
If you use SIP to invest in overnight and liquid mutual funds, then the cut-off time you must maintain is 1:30 PM of the same business day. For all the other types of mutual fund investment schemes, the cut-off time is 3:00 PM on any business day.
3. Can I buy mutual funds after 4 PM?
Yes, you can certainly buy mutual funds after 4 PM. However, you need to note that you will not receive mutual fund units at the applicable NAV of that day; instead, the transaction will be processed on the next business day, and you will receive the NAV of that day.
4. What is NAV cut-off time for equity mutual funds?
The NAV cut-off time for equity mutual funds on a normal business day is exactly at 3:00 PM after which you will not receive any units based on that day’s NAV.