What is the Cut-off time to buy or sell Mutual Funds in India?
When it comes to investment in mutual funds, many a people are not aware of some of the aspects about cut-off time. The time when you submit your request for buying or redemption of mutual funds also matters a lot. If you are a big time investor in mutual funds, these small things can affect the value of your portfolio to a great deal. Influence of global economies and frequent changes in national policies have made the stock market so volatile that even the value of NAV of a single day can bother you. What are the cut-off timings to buy a mutual fund? What are the cut-off timing for selling / redeeming a mutual fund? Can we make money in short term by understanding these cut-off timings in mutual funds?
Also Read: How to get amazing returns from Mutual Funds?
What are mutual funds?
Mutual funds are professionally managed investment programmes in which the money of several investors are pooled together and invested in stocks, bonds and other types of securities. As an investor, you can buy mutual fund units which denote your share of holdings in a particular scheme. The units can be purchased or redeemed at the current NAV (net asset value) of the fund. These NAVs keep fluctuating according to the market.
All the mutual funds are registered with SEBI and they function within the strict provisions of it. There are different types of mutual funds available in the market like equity, debt or liquid funds.
What is the Cut-off timing to buy mutual fund scheme?
Mutual funds bear official cut-off time for investment. The cut-off time determines the NAV of the units of mutual funds that you are going to buy. The NAV allotted to you depends upon the time of the submission of application as well as funds. Different types of funds bear different cut-off timings.
Cut-off timing for Liquid funds
The cut-off time is 2 p.m. for liquid funds. If you invest before 2 p.m. in a liquid fund, you will be allotted NAV of previous day. If this time is missed out, NAV of current day is allotted. One important point to be noted in this case is that application submission and transfer of fund- both should take place before 2 pm to get the NAV of previous day.
Cut-off timing for Equity and other debt funds
The cut-off time for equity and other debt funds is 3 pm. Here, if you submit the application form / invest in MF scheme before 3 pm, you get the current day NAV and the applications submitted after this time gets the NAV of next day. Please note that you need not transfer the funds before cut-off time but if you are investing more than Rs. 2 lakh, your funds along with application form / request in system need to be submitted before the cut-off time.
What are the Cut-off timings to sell or redeem the mutual funds?
Like buying, redemption / selling of mutual fund also bears cut-off time. But, at the time of redemption, there is no discrimination between the funds. All types of funds, be it equity, debt or liquid fund all are treated similarly. If the request for redemption is submitted before 3 pm, you would get money based on today’s NAV. And if request is made after 3 pm, your mutual fund units would be redeemed with next day’s NAV.
When should you worry about mutual fund cut-off timings?
Many a people might think that how does a NAV of one single day matter? Well! The people who are investing with a mind frame of long term investment or a small amount, one day NAV might not affect them but the people who are investing huge sums at a time may be worried about it. The difference of NAV of a single day will definitely have an impact on their portfolio.
The impact of single one NAV varies with the type of fund also in which you have invested.
How to make money in short term by considering the mutual fund cut-off timings?
Don’t get tempted with the title of the paragraph. You cannot make money in with these cut-off timings. If you are doing SIP’s, it would have any impact as your SIP transaction would get executed first thing in the morning. If you are investing lumpsum in mutual funds, you may look for these cut-off timings as it may vary between 0% to 0.5% of your investment value due to market fluctuations.
In case of buying of mutual funds, the NAV of previous day can be attained if the application / request for buying in system are submitted and funds are transferred before the respective timings of the funds. There are few days in which equity markets fluctuate a bit and investors can encash upon such situations. This way they can make money in the short run.
In the same way, if the application of redemption is made before 3 pm, the NAV of same day would come into play otherwise NAV of next day would be applicable. So, if someday the equity market has fallen and you expect that stock market is going to fall on the next day too and you are in urgent need of money, you can sell your mutual fund units before this cut-off time.
Conclusion: Understanding cut-off timings for mutual funds would help you to plan better. Many of us think that I am investing in a day, but investing in mutual funds in the morning or evening makes some difference. If you are investing lumpsum investments, it makes little difference.
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What is the Cut-off time to buy or sell Mutual Funds in India
just don’t worry too much for redemption for one lakh rupees and below. it will hardly have an impact for debt, a little bit for equities though . if your transaction is in crores, then makes a difference. but you are immensely rich. thumb rule just ignore , be happyb
Thanks. An easy to understand article.
Very useful guidelines. It appears there is no way of knowing the exact NAV at the time of buying and selling. In this situation how should one decide when to buy or sell, by seeing the trend of stock market indices?
I think there is a way. If you are analyzing the portfolio of a particular mutual fund and most of its holdings crashed (like Infosys last week), it might be a good time to buy because the NAV might go down the next day.