Mutual Fund

What is NAV (Net Asset Value)?

Just like an equity share has a traded price, a mutual fund unit has Net Asset Value per Unit. The NAV is the combined market value of the shares, bonds and securities held by a fund on any particular day (as reduced by permitted expenses and charges). NAV per Unit represents the market value of all the Units in a mutual fund scheme on a given day, net of all expenses and liabilities plus income accrued, divided by the outstanding number of Units in the scheme.

E.g, Assume that a mutual fund has Rs 100 worth of total investments in different securities, which is calculated based on the day's closing prices for each individual asset. It also has Rs 7 of cash and cash equivalents on hand, as well Rs 4 in total receivables. Accrued income for the day is Rs 7.5. The fund has Rs 13 in short-term liabilities and Rs 2 in long-term liabilities. Accrued expenses for the day are Rs 10. The fund has 5 shares outstanding.

The NAV is calculated as:
NAV = (Assets - Liabilities) / Total number of outstanding shares
NAV = [(Rs 100+ Rs 7+ Rs 4+ Rs 7.5) - (Rs 13+ Rs 2+ Rs 10)] / 5 = (Rs 118.5 - Rs 25) / 5 = Rs 23.7

For the given day, the mutual funds shares will be traded at Rs 23.7 per share.

Type of Mutual Fund schemes

Mutual Fund schemes could be ‘open ended’ or close-ended’ and actively managed or passively managed.

Open-Ended and Closed-End Funds

An open-end fund is a mutual fund scheme that is available for subscription and redemption on every business throughout the year, (akin to a savings bank account, wherein one may deposit and withdraw money every day). An open ended scheme is perpetual and does not have any maturity date.

A closed-end fund is open for subscription only during the initial offer period and has a specified tenor and fixed maturity date (akin to a fixed term deposit). Units of Closed-end funds can be redeemed only on maturity (i.e., pre-mature redemption is not permitted). Hence, the Units of a closed-end fund are compulsorily listed on a stock exchange after the new fund offer, and are traded on the stock exchange just like other stocks, so that investors seeking to exit the scheme before maturity may sell their Units on the exchange.

Actively Managed and Passively Managed funds

An actively managed fund is a mutual fund scheme in which the fund manager “actively” manages the portfolio and continuously monitors the fund's portfolio, deciding on which stocks to buy/sell/hold and when, using his professional judgement, backed by analytical research. In an active fund, the fund manager’s aim is to generate maximum returns and out-perform the scheme’s bench mark.

A passively managed fund, by contrast, simply follows a market index, i.e., in a passive fund , the fund manager remains inactive or passive inasmuch as, she does not use her judgement or discretion to decide as to which stocks to buy/sell/hold , but simply replicates / tracks the scheme’s benchmark index in exactly the same proportion. Examples of Index funds are an Index Fund and all Exchange Traded Funds. In a passive fund, the fund manager’s task is to simply replicate the scheme’s benchmark index i.e., generate the same returns as the index, and not to out-perform the scheme’s bench mark.

Mutual Fund Industry in the last 10 years.

The Mutual Fund Industry has grown at an exponential rate in the last few years. It will be visible from the below mentioned chart.

The Mutual Fund Industry has reached 22.2 lakh crores in 2017-18 and currently is at 25.5 lakh crores which portrays an exorbitant growth in this Industry. The Mutual Fund Industry has grown by around 5 times in a short span of 7 years.

On the other hand, the investor count has also increased from 4.76 crores in Mar’09 to 8.25 crores in Mar’19.

The number of folios in the Mutual Fund Industry has increased by almost 100% over the last 4 years

Classification of Mutual Funds

Broadly, the Mutual funds are divided into 3 major categories on the basis of their investments

Modes of investing in Mutual funds

Advantages of moving to Exchange Platform (ICEX MF):

Infrastructure required to access ICEXMF platform:

ICEXMF is a web-based platform and can be access from any terminal, Computer or laptop having internet access.

We recommend below mentioned System requirements for better performance:

Browser: Google Chrome or Internet Explorer
Processor (CPU): Intel Core i3 (sixth generation or newer)
Operating System: Microsoft Windows 7 x64/x32 or newer
Memory: 2 GB RAM or Better
Storage: 500 GB internal storage drive

How to obtain access to ICEXMF platform:

In order to obtain access of ICEXMF platform, he needs to be registered as a Member on the exchange platform. There are two kinds of Membership

Client Registration

The distributor will have the provision to register clients / investors on the platform. The registration can be done entry wise i.e. single entry one at a time or through a bulk upload facility. The distributor or Member will allot a Unique Client code for each and every client.

Multiple Registrations:

The investor can register on this platform only once through one distributor. However he will be allowed to register with the same PAN in case the mode of holding is different. An investor can have only one registration on this platform based on his PAN + mode of holding.

An investor will be allowed to transact with only one broker on the platform. Thus the unique identifier for transacting would be Broker + PAN + Mode of Holding

Mandatory requirements for a client to enter a transaction on ICEXMF platform

Transaction Process:

The transaction flow for Purchase and Redemption is mentioned below. This will give a perspective of the process and the number of stakeholders involved to ensure that the transaction is processed successfully and provide clarity to the investor and Member.

The Member has to ensure jointly with the investor that the transactions for the respective schemes are placed before the stipulated time.

In case, the transaction is submitted after the stipulated time, it will be considered for processing on the subsequent date.

Order Type	Purchase CUT-OFFs for Member to place order	FUNDS TRANSFER (EXCH TO AMC)
L0	9:00 AM to 12:30 PM	BEFORE 1:30 PM
L1	9:00 AM to 2:00 PM	BEFORE 3:00 PM
NORMAL (EQUITY/DEBT/LIQUID)	9:00 AM to 3:00 PM	T+1 DAY, BEFORE 10:00 AM

• L0 : These schemes are Liquid Schemes, where you will get the NAV of T –1 DAY (Previous Days) . Any redemption for these schemes should be incorporated in the Normal schemes.
• L1 : These Schemes are Non Liquid Schemes where the investment transaction done is more than 2 lacs per scheme. Any redemption for these schemes should be incorporated in the Normal schemes.
• Purchase CUT-OFFs : In order to get the same days NAV benefit, Exchange shall be accepting the orders till the purchase cut-off time.
• FUND OBLIGATION: it is the cut-off time, before which exchange has to transfer the funds to respective AMC’s.

Order Type	Redemption CUT-OFFs	FUNDS PAYIN
LIQUID	9:00 AM to 3:00 PM	T + 1 DAY
EQUITY/DEBT	9:00 AM to 3:00 PM	As Per Settlement Type. i.e. T1|T2|T3|etc.

• T DAY: Transaction Day