Clarification on Liquid Mutual fund – Previous day NAV

POSTED BY MAYUR KUMAR ON December 27, 2014 11:25 am COMMENTS (18)

Hi,

I have purchased UTI – Money Market Fund (Instn Weekly Dividend – Direct) on 3rd Dec 2014 before 2PM. Amount is 4lakhs. But, the purchase transaction processed on Previous day NAV  (2nd Dec 2014) Rs 1015.95 .Is this correct.?

If this is correct, On same Previous day(2nd Dec 2014), there is a dividend announcement on this scheme. Then am i eligible for this divided because my investment 4 lakhs rupees blindly  came down to Rs 3,99,441.58.This is because of dividend announcement. Will I get my dividend? If dividend is not applicable, where is my money Rs 558.42 went? Is it with UTI mutual fund?

Let me know if this right forum to ask this question.If not, Could you please help me where to contact.

Regards

 

Mayur.

18 replies on this article “Clarification on Liquid Mutual fund – Previous day NAV”

  1. Sudhakar says:

    Does these previous day rule applies to redemption also? I placed a full redemption of money market fund on 31-MAR-16 well before cut-off time ( to avail current financial year last date). However the transaction is processed on 3-APR-16. When I called customer care, the response is some what surprising. Being 1-ARP-16 non business day, they processed it on 3-APR-16 (2nd Apr being Saturday). If T+1 is non-business day, what NAV is applied? I could not get much information from SEBI site.

    1. Hi Sudhakar

      Thanks for asking your question. However, I dont think I am eligible to answer your query as its either out of scope of my knowledge or its not related to money matter directly

      Manish

  2. MAYUR KUMAR says:

    Manish, Still you didn’t understand the problem here.As you said my Mutual fund worth 4 lakhs rupees blindly came down to Rs 3,99,441.58 on the first day of investment 3rd Dec 2014.This is because of dividend announcement. MY purchased NAV is 2nd Dec 2014 which is before dividend announcement because of Previous day NAV concept in liquid mutual funds.
    But i didn’t get dividend amount of Rs 558.42 till date.
    I hope you have understood the scenario.Whatever you are explaining is correct if my purchase transaction is processed with 3rd Dev NAV which is after Dividend announcement.

  3. MAYUR KUMAR says:

    UTI Customer care said – NO,I will not get dividend because dividend declared on 2nd Dec 2014 and i have purchased on 3rd Dec 2014 even though 2nd Dec 2014 NAV is applicable for this purchase transaction. I have got the above confirmation from UTI Mutual fund.

    My question here is that is UTI reply is correct or not?
    Does SEBI is aware of this or not?and this Previous day NAV is also applicable for all SBI AMC,HDFC,ICICI Prudential AMC And all other Mututal fund AMC’s.
    Are all these AMC’s also not giving dividend for purchases on Previous DAY NAV?

    If UTI reply is Correct, i have couple of below questions,
    Even though i didn’t get dividend,then where is that money going?My investment 4 lakhs rupees blindly came down to Rs 3,99,441.58.This is because of dividend announcement. My question is Where is my money Rs 558.42 went?

    Lets Educate all the investors through JAGOINVESTOR that never invest in liquid fund just after the day of dividend announcement before cut off time(2PM).Because Investor always lose money.

    1. I think UTI is correct, because dividend is given only to those whose name appear in their books on the date of declaration

      1. MAYUR KUMAR says:

        Fine Manish. As you said,i agree that Neither i won’t get dividend nor Purchases NAV is after Dividend declaration.There so many questions are coming out in my mind.
        If we felt UTI reply is correct,Do you agree that investing in liquid mutual funds after dividend announcement date before Cut off time makes you to lose money.If it is a Annual dividend scheme,it will be huge.But where is that money going?Who is gaining the amount?

        1. First thing is why are you worrying about it at all . In mutual funds , if its a dividend option, then you get the dividend and your mutual funds NAV change in such a way that it nullyfies the effect . So your MF worth reduced by that margin . Like if lets say we both bought funds worth Rs 10,000 in start and Rs 2,000 was dividend declared.

          I get it and you dont . So I will have Rs 2,000 in my hand and my funds will be worth Rs 8,000 totalling Rs 10,000 . In your case, your funds will be worth Rs 10,000 itself, so we both are at same level , just that I have some money in hand .

          1. MAYUR KUMAR says:

            Manish, Still you didn’t understand the problem here.As you said my Mutual fund worth 4 lakhs rupees blindly came down to Rs 3,99,441.58 on the first day of investment 3rd Dec 2014.This is because of dividend announcement. MY purchased NAV is 2nd Dec 2014 which is before dividend announcement because of Previous day NAV concept in liquid mutual funds.
            But i didn’t get dividend amount of Rs 558.42 till date.
            I hope you have understood the scenario.Whatever you are explaining is correct if my purchase transaction is processed with 3rd Dev NAV which is after Dividend announcement.

  4. MAYUR KUMAR says:

    Actually for liquid schemes previous day NAV will be applicable if the funds are received before 2pm.This is correct.
    But what about dividend?Dividend is announced on Dec 2nd 2014.
    I have purchased on Dec 3rd 2014 before 2pm where Dec 2nd NAV is applicable. Nav went down from 2nd Dec 2014 to 3rd Dec 2014 because of Dividend announcement.
    Should i get dividend or not?

    1. Hemanth says:

      Have u contacted the UTI customer care ?

      1. MAYUR KUMAR says:

        Yes i have contacted UTI.
        UTI has given written reply that “You have purchased in liquid fund on Dec 3rd 2014 before cutoff time, NAV applicable date is 2ndDec 2014(Previous day) but Dividend is not applicable announced on 2nd Dec 2014,since dividend declared on 2nd Dec 2014.. I have got the above confirmation from UTI Mutual fund.

        If UTI reply is correct,then investors is always lose the money when he invest in a liquid fund immediately next day before 2PM of Dividend announcement date.
        This could be applicable to Annual dividend liquid mutual fund scheme also.

        How do i know UTI REPLY IS CORRECT OR NOT?Is there any Mutual fund expert that i can ask?

        1. Hemanth says:

          I would request u to call the customer care and ask them clearly… I am sure there is some mistake. Haven’t heard of previous day NAV.

          1. MAYUR KUMAR says:

            Hemanth,
            Previous day NAV for liquid finds is correct .Because it enables us to buy Sunday,Holidays NAV.
            In the case of liquid funds, NAV is declared on holidays and non-business days. For example, NAV is declared for Sunday.
            http://www.thehindubusinessline.com/money-wise/mutual-funds/which-nav-should-apply-to-your-transaction/article2801318.ece

            But they didn’t explain whether dividend of previous day will be applicable or not?I want to clarify with any Mutual fund expert whether UTI reply is correct or not.
            In Case of liquid funds,If previous day dividend is not applicable but previous day NAV is applicable, then then investors is always lose the money.Does SEBI knows about it?

          2. In Liquid fund, previous day NAV is applicable if you buy it before 2 pm

            1. MAYUR KUMAR says:

              Manish,
              Iam aware of that Previous day NAV applicability for liquid finds is correct,I AGREE.But no one is talking about what happens if there is a dividend announced on that same previous day?Will the investor get the Previous day dividend or not?If yes,No problem.
              If no, then where is that money going?And investor will be always loser.
              If dividend is not applicable,Lets educate investors to not to invest in liquid fund just after the day of dividend announcement before 2PM (CUT OFF time).

            2. OK .. I myself dont have idea on that !

  5. Hemanth says:

    There might be some issue in issuing the units for you. Better contact the UTI customer care. They will be able to help you out. Also, why do u want to invest in Weekly Dividend option. ?

    1. MAYUR KUMAR says:

      Hi Hemanth,

      In liquid funds ,there is Previous day NAV concept.
      Let’s say if you purchase a liquid fund Rs 50000, today(Jan 2nd 2015) before 2PM(CUT OFF TIME),then Transaction is processed with Previous day NAV(Jan 1st 2015).
      On Jan 1st 2015,there is also dividend announcement of Rs 10.

      For Example,
      JAN 1ST 2015 NAV value is 100. Dividend of Rs 10 is announced.
      Jan 2nd NAV VALUE IS 90.

      In this scenario , On Jan 2nd 2015,My Rs50000 is processed with Previous day NAV 100 ,GOT 500 Units. This is correct because I purchased before CUT OFF Time,PreVIOUS DAY NAV is applicable.
      On Jan 2nd , my worth reduced to Rs45000/-. I didn’t get dividend because I purchased on Jan 2nd and dividend announced on Jan 1st.Is this correct? Who is getting Rs 500 dividend?
      If this is correct, Anyone who purchases Liquid fund on the day after dividend announcement date will always be loser. And who will be the gainer?

      Regards
      Mayur.

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