Asset management companies have temporarily changed the cut-off timings for purchase and redemption of mutual funds between 7 April to 17 April in line with a reduction in money and forex market trading hours.
A notification from AMFI (Association of Mutual Funds in India) said:
“In case of subscription (Purchase & Switch-In)
- For Liquid and Overnight Funds – 12:30 p.m.
- For other than Liquid and Overnight Funds – 01:00 p.m.
In case of Redemption & Switch Out
- For Liquid and Overnight Funds – 01:00 p.m.
- For other than Liquid and Overnight Funds – 01:00 p.m”
“All other provisions of various SEBI Circulars related to applicability of NAV in case of both subscription and redemption shall remain unchanged,” it added.
This change comes after RBI reduced the work timings of banks as well as trading hours for forex market, gilts market and other money market instruments to operate from 10 am to 2 pm.
The changes will be effective from 7 to 17 April 2020, both days inclusive.
What the change in cut-off timings mean for investors?
For liquid and overnight funds, the cut-off time for making previous day’s NAV (net asset value) applicable has been moved to 12.30 pm from 1.30 pm. If you buy or switch to a fund, your order should be placed before 12.30 pm, to make the previous day’s NAV applicable. For orders placed after 12.30 pm, the same day’s NAV will apply.
For other mutual funds (including debt, equity and hybrid), the cut off time to make previous day’s NAV applicable is 1 pm instead of 3 pm. On orders placed after 1 pm, the same day’s NAV will be taken into account.
To redeem a fund, the cut-off is 1 pm on all types of mutual funds.
Why was the change made?
For a mutual fund transaction, the AMC has to co-ordinate with the custodian as well as Registrar and Transfer Agents (RTA). Custodians hold and safeguard a mutual fund unit and RTAs are record keepers.
For an incoming investment in a fund or redemption, cheque and banking clearances, as well as RTA clearance, is required. For a transaction to happen inside bank and bond market timings and reduce backlogs in orders, the timings were restricted to align.