NAV or net asset value of a mutual fund is nothing but the worth or market value of securities held in the scheme. SEBI has put forth the formula for the calculation of NAV and all the mutual funds use it to compute the NAV value.
NAV is the sum total of assets of the fund less its total liabilities divided by the number of outstanding units of the fund. So, as both the assets and liabilities of the fund change on a daily basis, NAV value also varies on a day to day basis. As a result, mutual funds declare closing NAV for a particular scheme daily by 9pm.
How it affects you?
Normally, mutual funds offer a new fund offer at a face value of Rs 10. Now, let's say that you subscribed to 100 units at the face value of Rs 10. You would be paying Rs 1000. Now, if the fund has invested in shares and securities the funds NAV would rise or fall. If the NAV rises to Rs 11, then your portfolio value would be 100 units x 11 = Rs 1100. You would therefore have made a gain of Rs 100.
As per the ruling of SEBI, the NAV value of a mutual fund scheme is required to be computed and published in not less than two daily newspapers in a time span not exceeding a week. Nevertheless, closed-ended scheme and certain monthly income schemes can declare and publish the NAV at quarterly or monthly intervals.