Know About Mutual Funds Cut Off Time

Published On: 27-Jul-2020

Mutual fund transactions are processed based on the prevailing Net Asset Value (NAV) of the respective scheme. To bring uniformity in the operational processes, SEBI (Securities & Exchange Board of India) has prescribed the cut-off timings for mutual fund transactions across all the mutual fund houses. 

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The mutual fund transactions must be received digitally or at the official Points of Acceptance before the cut-off timings to be considered for NAV applicability as per the prescribed guidelines. For transactions in liquid and overnight funds, the funds must also be received by the mutual funds to be considered for processing on the same day. 

Depending upon the practical issues in receiving and utilising the investment amounts and processing redemption proceeds, the NAV applicability differs for liquid/ overnight funds and other funds. For investment transactions in liquid and overnight funds, clear funds must be received by the fund house before 1.30 PM to consider them for processing on the same day. 

In contrast, the investment transactions in other funds and redemption transactions for all funds must be received by the mutual funds before 3 PM for processing the transaction for NAV of the same day. The summary of the respective cut-off time for mutual funds is as under:

Particulars

Cut-off timings

NAV Applicability

Investment in liquid and overnight funds

1.30 PM

Preceding business day

Investment in other funds

3.00 PM

Same day

Redemption in all funds

3.00 PM

Same day

 

Source: https://www.amfiindia.com

The transactions received before the cut-off time in mutual funds are processed on the same day, and the applicable NAV will be as per the table above. However, the transactions received after the cut-off time are processed on the next business day.

Applicable Price for Mutual Funds Transactions 

All the mutual fund transactions are processed at the prevailing NAV for the mutual fund scheme. The fund house calculates such NAV after the fair valuation of all the portfolio investments and other assets and deducting the scheme liabilities from such amount. 

The resultant amount is divided by total outstanding units to calculate the NAV per unit, which is disclosed by all fund houses on all business days. However, the investors should not make their investment decisions based on whether the NAV is higher or lower. A high or low NAV is practically not an indicator of fund performance. 

Changes in the Cut-Off Timings due to Covid-19

Due to the Covid-19 lockdown situation and preventive social distancing norms applicable across the country, the Reserve Bank of India (RBI) reduced the trading hours for money markets. Since the treasury function for mutual funds relies significantly on the money markets, SEBI has modified the cut-off timings for subscription and redemption in mutual fund schemes until further notice. 

For the investment transaction in liquid and overnight funds, the regular cut-off timings of 1.30 PM have been modified to 12.30 PM. Similarly, for investment transactions in other funds and redemption transactions in all mutual fund schemes, the regular cut-off time of 3 PM has been modified to 1 PM temporarily. 

Once the RBI Money market timing is restored, SEBI may also consider withdrawing the particular timings and restoring the same to regular timings. The summary of changes in the applicable cut-off timings for mutual fund transactions are as under:

Particulars

Regular Cut-off timings

Modified Cut-off timings due to Covid-19 outbreak

Investment in liquid and overnight funds

1.30 PM

12.30 PM

Investment in other funds

3.00 PM

1.00 PM

Redemption in all funds

3.00 PM

1.00 PM

 Source: https://www.amfiindia.com 

Cut-off timings are an important determinant for the NAV applicability for mutual fund transactions. The investors can confirm the respective NAV applicability from the transaction statement received from the mutual fund transaction after the transaction has been processed.

Disclaimers: The information set out above is included for general information purposes only and is not exhaustive and does not constitute legal or tax advice. In view of the individual nature of the tax consequences, each investor is advised to consult his or her or their own tax consultant with respect to specific tax implications arising out of their participation in the Scheme. Income Tax benefits to the mutual fund & to the unit holder is in accordance with the prevailing tax laws/finance bill 2020. Any action taken by you on the basis of the information contained herein is not intended as on offer or solicitation for the purchase and sales of any schemes of UTI mutual Fund. Please read the full details provided in SID and SIA carefully before taking any decision.

UTI AMC Ltd is not an investment adviser, and is not purporting to provide you with investment, legal or tax advice. UTI AMC Ltd or UTI Mutual Fund (acting through UTI Trustee Company Pvt. Ltd) accepts no liability and will not be liable for any loss or damage arising directly or indirectly (including special, incidental or consequential loss or damage) from your use of this document, howsoever arising, and including any loss, damage or expense arising from, but not limited to, any defect, error, imperfection, fault, mistake or inaccuracy with this document, its contents or associated services, or due to any unavailability of the document or any part thereof or any contents or associated services.