Sebi proposes changes to net asset value calculation for overnight schemes

The Securities and Exchange Board of India (Sebi) on Monday proposed changes to the cut-off timings for determining the net asset value (NAV) in the case of repurchase transactions for mutual fund “overnight schemes.”

 

As per the proposal, if an application is received by 3 pm for liquid funds and by 7 pm for overnight funds, the closing NAV of the day immediately preceding the next business day will be applied. For applications submitted after these timelines, the closing NAV of the next business day will be considered.

 

NAV represents the market value of an investor’s mutual fund holdings and is a key metric for understanding the worth of their investments.

 

Sebi’s proposal is linked to the mandate for stockbrokers to upstream client funds, requiring the placement of clients' credit balances with clearing corporations (CCs) at the end of each business day.

 

Under this mandate, stockbrokers can upstream client funds to CCs only in the form of cash, liens on fixed deposit receipts, or pledged units of mutual fund overnight schemes created using client funds.

 

This upstreaming mechanism ensures minimal risk to client funds, as overnight schemes primarily invest in risk-free government securities and are available for short tenures.