Market regulator SEBI has decided to reduce the cut-off time for buying and selling mutual funds till April 30 as stated by Amphi, an organization of mutual fund companies. SEBI has taken this decision after the Reserve Bank has lowered the trading time for the bond market. SEBI had decided to reduce the cut-off time of buying and selling mutual funds from 3 pm amid lockdown across the country.
The first revised cut-off time was from April 7 to April 17, but, now, it has been extended till April 30. The cut-off time for the purchase will be 12:30 pm till 30th April and one o’clock in the sale.
When you buy or sell a unit of your mutual fund scheme, the cut-off time decides the Net asset value (NAV) you are entitled to receive. Whether it’s the NAV of the same day or the previous day or the next day, it depends on the time in which you submit your application and make the payment.
In normal situations when you buy liquid/Overnight funds units of overnight funds and transfer funds before 1.30 pm in a business day with submitting your application form, you are allotted units on the last day’s NAV.
After 1.30 pm, if you do so, units are allotted on the same day nav. Note that if you submit your application before the cut-off time, but the fund transfer is done thereafter, you are allotted the unit on the nav of the same day.
The normal cut-off time for buying units of Equity/Hybrid/Date funds is 3 pm. If you submit the application and make the payment before 3 pm, you will be allotted to the units in the NAV of the same day. If your application is submitted after 3 pm, you will get the next day’s NAV.
Cut-off timing is important for large investors like institutions, banks, and HNIs. They often wait until 3 p.m. to understand the trends in financial markets (including Indian and global). Then, according to that, they put the money in equity/overnight funds. For investors who put large sums of money elsewhere, a slight difference in returns has a significant impact. A few hours also matter when markets are changing very fast.
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