What is Net Assets Value (NAV)?

NAV is the market value of each unit of a Unit Linked Insurance Plan (ULIP) fund. In simple words, if you add the market value of all the investments in the fund and divide it by the number of units in that fund the resulting figure will be the NAV. Just like shares have a share price, ULIP funds have an NAV.

It is not wise to base your investment decision on the NAV of a ULIP fund. The NAV does not reflect the future prospects of the ULIP fund.

Suppose you invest ₹ 10,000/- each in Fund A with an NAV of ₹ 20/- and Fund B with an NAV of ₹ 100/-. You will be allotted 500 units of Fund A and 100 units of Fund B. Assuming that both funds have invested their entire corpus in exactly the same stocks and the same proportions if the underlying stocks collectively appreciate by 10%, The NAVs of the two funds should also rise by 10% to ₹ 22/- and ₹ 110/- respectively. Thus, in both scenarios, the value of your investment increases to ₹ 11,000/-.

Thus, the current NAV of a fund does not have any impact on the returns.

How does investment timing affect NAV?

In case of the ULIP fund, the cut-off time is 3:00 pm. You will be allotted the NAV on the same day or the next day according to the time at which you submit your application and funds. Usually, if the application form and funds are received before 3:00 pm; units are allotted based on the same day's NAV, otherwise, units are allotted based on the next day's NAV.

Valuation methodology of equity shares as prescribed by the Insurance and Regulatory Development Authority of India (IRDAI)

IRDAI has through IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024 mandated Insurers to measure fair value of equity shares at last quoted closing price on NSE. However, in case of any stock not being listed in NSE, the insurer may value the equity shares based on the last quoted closing price in BSE.

Modification in NAV computation

As stipulated by IRDAI effective August 18, 2011

As stipulated by the IRDAI in its circular dated July 29, 2011 the formula for the computation of the NAV for linked funds stands modified.

The old formula as prescribed by IRDAI and as contained in the policy document: Market value of the investment plus/(minus) expenses incurred in the purchase/(sale) of assets plus current assets and accrued interest (net of fund management charges) less current liabilities and provisions, divided by a number of units outstanding under the fund at valuation date (before creation/redemption of units).

The modified formula as stipulated by IRDAI effective August 18, 2011: Market value of the investment held by the fund plus value of current assets less value of current liabilities and provisions, if any and divided by the number of units existing on the valuation date (before creation/redemption of units).

The policy document shall accordingly stand modified.

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COMP/DOC/May/2020/275/3713