NAV or Net Asset Value of a mutual fund scheme that underlines the performance of a particular scheme is computed by decreasing total liabilities of a fund by the total assets held under the scheme divided by the number of outstanding shares.
More precisely, NAV that reflects funds intrinsic worth moves higher or lower depending on the investments made by the fund manager as well as for how long the fund has sustained its existence in the market.
Generally speaking, new investors in a scheme shall prefer a lower NAV value as in that case investors shall realize more number of units.
But, in case the portfolio of the two mutual fund schemes under consideration is the same than even though lower NAV corresponds to you being allotted more number of fund units, the overall portfolio value that is computed by multiplying NAV of the scheme with the number of units by investment in either of the schemes shall remain the same.
In any case, the most important thing is the quality of stocks in the portfolio that form part of the NAV.
So, the NAV should not be the criteria for you to select a mutual fund scheme. And, NAV of the scheme cannot be taken to be synonymous to share price and determine investment direction of the investor.
Instead other factors should come to play while you decide to bet on a mutual fund scheme, including funds performance over a similar time frame, your own risk appetite and management style adopted by the fund house among other relevant criterion.
Nonetheless, when talking about dividends (in case you have not opted for cumulative schemes), scheme at a higher NAV shall result in the realization of a lesser dividend amount for the investor as the higher NAV that correspondingly translates into lesser scheme units means lowered dividend as dividend distributor is done on face value or on unit basis and with lesser units in hand, the subscriber in a scheme whose NAV is currently high is entitled to lower dividend.
So, despite you realizing lower absolute dividend in the case when the mutual fund scheme has a higher NAV, total returns in case of the two schemes with different NAV values but having similar portfolio allocation will yield same returns.