In a communication sent to asset management companies, the Securities and Exchange Board of India (SEBI) said that the cut-off time for equity mutual fund purchases and redemptions will be restored to 3 pm with effect from Monday, 19 October 2020, Mint reported.
For debt and conservative hybrid funds, however, the truncated cut-off time will continue.
The cut-off timing decides NAV (net asset value) calculation for mutual funds. SEBI had reduced the cut-off time for mutual fund schemes, other than liquid and overnight, to 1 pm from 3 pm in April due to the disruptions induced by the coronavirus pandemic and the nationwide lockdown. For liquid and overnight funds, the cut-off time was reduced to 12.30 pm from 1.30 pm.
"For debt schemes and conservative hybrid fund the cut-off timings may be continued till further notice by RBI (Reserve Bank of India) on the truncated market hours," SEBI circular said, as quoted on Mint.
In the recent changes made to mutual fund rules, starting 1 January 2021, NAV on units shall be allotted on the basis of when the amount is realised irrespective of the size or time of the investments.
The provision does not apply to liquid and overnight funds as the realisation of funds on the same day is already required for purchases in such schemes.
At present, mutual fund investors with cheque values of less than Rs 2 lakh per application get the NAV of the product on the same day of purchase, when made before the cut-off time. For investments over Rs 2 lakh, NAV applicable will be of the day the fund house has realised the cheque. This could be up to three days after the cheque is submitted.
As per the circular, the money should also reach the mutual fund house before 3 pm (cut-off time) for that day's NAV to be applicable.
The change will create a level playing field for investors across mutual fund schemes and is also likely to increase the use of digital payments.