4 replies on this article “NAV allocation query”

1. annu707in says:

   March 15, 2012 at 4:39 pm

   Many thanks BanyanFA and justgrowmymoney for your expert advice which is spot on to what I wanted to know.

   I will check the timelimit with moneysights.

   Regards,
   Anurag

   Reply
   1. ashal jauhari says:

      March 16, 2012 at 12:56 am

      Dear Anurag, So I assume, your employer is allowing you to just check the market level on minute to minute basis & it’s paying you the salary for such tracking. There is no other job to be done by you in your normal working hour. Am I right?

      Apart from this employer thing, what you are going to achieve from such unplanned investments. Is it not the timing of market & nth time it has been said that timing the market is futile. Just reverse your question – Market is up by 300 points so at what time, should I place my redemption order? Now try to answer it.

      Thanks

      Ashal

      Reply
2. justgrowmymoney says:

   March 15, 2012 at 3:57 pm

   Anurag – This is chiefly based on the assumption that most funds rise and fall with the market. However this need not hold true for all schemes. On any day the markets fall some stocks will always rise. Today: 8 Nifty stocks fell while 41 declined and 1 was unchanged. If you scheme predominantly consists these stocks it is likely the NAV will be higher. But since MFs usually don’t have weightage of 1 stock for more than 3-5% and also ensure the combined contribution of say their top 10 holdings do not go beyond 35% etc. it is highly LIKELY that NAVs rise and fall with markets.

   You can do a little bit of smart timing the market here.

   First check the time limit with Money sights. Time limit is 3 PM if you directly do with AMC and it is usually few minutes earlier with other channels (Say like ICICI Direct or HDFC ISA or FundsIndia). Few minutes before this cut off (because you have to login and pay thru netbanking etc.) you can place a call. Historically there have been very few times over the market history that the markets have completely recovered and headed north in the last 30-40 minutes. If you see Nifty is down 100 points around 3 PM then most likely Nifty will close between -80 and -120 by end of closing. Ofcourse there are no guarantees. It may settle -20 by end of day or -200 as well. But investing close to the cut off can most of the time ensure you get a lower NAV than the previous day.

   IMPORTANT: This must not be anyone’s core strategy. Let SIPs and STPs permanently run. On days like today when Sensex fall some 250 to 300 points you can go and gently push some 1-2k or so depending on your risk appetite and I strongly recommend this single investment must never be a huge amount.

   Reply
3. BanyanFA says:

   March 15, 2012 at 3:48 pm

   Anurag,
   I am not sure how moneysight account works, but the AMCs have a cutoff time by which if they receive the buy / sell order they shall apply the NAV of that day for the transaction.

   Basically NAVs are computed on a daily basis after the end of the day. So if sensex dropped 300 points, it may have an effect on the portfolio held by the respective MF scheme you are interested in.

   The cutoff time currently for Equity schemes is 15:00 hours (as per SEBI). Depending upon how efficient each broker is from where you are placing your MF order, it can be as close to 15:00 hours.

   Hence to answer your query, if you place a buy / sell order with a mutual fund before 14:00 hours, your transaction shall get executed on the NAV which shall be computed at the end of the day. If you place the order after 14:00 hours, your transaction shall be executed at NAV shall be computed on the next day’s End of day rates.

   For details on cutoff you can refer to SEBI circular at http://www.sebi.gov.in/circulars/2006/mfcir112006.html

   Regards
   BFA

   Reply

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