Understanding NAV And Mutual Fund Performance With Bajaj Finserv AMC

Investors, whether experienced or new to mutual funds, typically seek to understand how a scheme has performed over time. One commonly referenced indicator in this context is the Net Asset Value (NAV) of a scheme. Tracking NAV over time can reflect the percentage change in the per-unit value of a mutual fund scheme over a defined period.

This article explains what NAV means, how it is calculated, the components of the NAV formula, and how it may be interpreted for performance evaluation. It also outlines factors that may influence NAV and how this metric fits within broader performance assessment.

Table of contents

• What is Net Asset Value (NAV)?
• Why is NAV important for investors?
• Decoding the NAV return formula
• Components of the NAV return formula explained
• How to calculate NAV return step-by-step:
• Illustrative example
• Interpreting long-term performance
• Factors that may influence NAV
• NAV vs. other performance metrics

What is Net Asset Value (NAV)?

Net Asset Value represents the per-unit value of a mutual fund scheme. It is calculated by taking the total value of all assets held by the scheme, subtracting liabilities and expenses, and dividing the resulting net value by the number of outstanding units.

The NAV for a scheme is calculated at the end of each business day. The percentage change in NAV between two points in time is informally referred to as the NAV return. It reflects how the per-unit value of a mutual fund has moved over a selected period, either upward or downward. without implying future outcomes or investment suitability. Past performance may or may not be sustained in future.

Why is NAV important for investors?

NAV return may be used as a reference point for understanding mutual fund performance for the following reasons:

• It reflects the percentage change in the per-unit value of a scheme over a chosen period
• It allows comparison of a scheme’s value at two different points in time
• It may help investors review performance against stated financial objectives
• It is relatively easy to understand and does not require advanced financial calculations

However, NAV return is a historical measure and does not indicate or predict future performance.

Also Read: NAV in SIP: Definition, Formula and Calculation

Decoding the NAV return formula

The commonly used formula to calculate percentage change in NAV or NAV return for a specific period is:

NAV Return (%) = [(Final NAV – Initial NAV) / Initial NAV] × 100

Components of the NAV return formula explained

The NAV return formula consists of the following elements:

• Initial NAV: The NAV at the beginning of the selected time period.
• Final NAV: The NAV at the end of the selected time period.
• Change in NAV: The difference between the final NAV and the initial NAV, reflecting how the scheme’s value has changed during the period.
• Time period: NAV return is always calculated for a defined duration, such as daily, monthly, yearly, or across multiple years.

NAV return does not account for investor-specific factors such as exit loads, transaction costs, or taxation.

How to calculate NAV return step-by-step:

The steps involved in calculating NAV return are as follows:

• Select the time period to be evaluated
• Note the NAV at the beginning of the period
• Note the NAV at the end of the period
• Apply the values to the NAV return formula
• Express the result as a percentage

Illustrative example

Assume a hypothetical equity-oriented scheme has the following NAV values:

• NAV at the beginning of the period: Rs. 100
• NAV at the end of the period: Rs. 112

Using the formula, the NAV return would be 12 percent.

*Example is for illustrative purposes only and does not represent any actual scheme.

Interpreting long-term performance

Point-to-point NAV change may be suitable to assess performance over shorter periods. For longer investment horizons, performance is commonly expressed using the Compound Annual Growth Rate (CAGR), which represents the rate at which an investment would have grown year-on-year if gains were reinvested and compounded over time. It smooths out volatility to give a single measurement of year-on-year growth.

CAGR is derived from the change in NAV between the start and end of a period.

CAGR may help investors:

• Understand how an investment has progressed on an average annual basis over longer periods
• Compare performance across different time horizons in a consistent manner
• Assess long-term growth trends while recognising interim volatility

While CAGR presents performance as a single annualised figure, it does not eliminate underlying market risks or reflect year-to-year variations.

Also Read: What to do when mutual fund NAV goes below buy price?

Factors that may influence NAV

NAV is influenced by several interrelated factors, including:

• Market movements: Changes in the prices of securities held in the portfolio.
• Economic conditions: Interest rate movements, inflation trends, and broader macroeconomic developments.
• Portfolio composition: Asset allocation, sector exposure, and individual security weightages.
• Scheme expenses: Expense ratios are adjusted before NAV is declared and therefore affect NAV returns.
• Corporate actions: Dividends, mergers, or splits related to underlying securities.

Due to these variables, NAV is dynamic and may vary across periods.

NAV vs. other performance metrics

NAV return is one of several metrics that may be used to evaluate mutual fund performance. Other commonly used measures include:

• Compound annual growth rate
• Extended internal rate of return (XIRR; suitable for SIPs)
• Risk-adjusted measures such as standard deviation or Sharpe ratio
• Rolling returns to observe performance across overlapping periods
• Benchmark comparison, as required under SEBI’s prescribed framework

A comprehensive assessment typically involves reviewing multiple indicators rather than relying on NAV return alone.

Conclusion

NAV return can help measure how the per-unit value of a mutual fund has changed over a defined period. It may help investors track historical value movement across both short-term and long-term horizons. When used alongside other performance indicators and risk measures, NAV return may support a more balanced evaluation of mutual fund schemes, without implying certainty or future outcomes.

Past performance may or may not be sustained in future.

FAQs

Does NAV return include expense ratios and other charges?

Yes. NAV is calculated after adjusting for scheme-level expenses, and NAV return reflects their impact. Exit loads, taxes, and investor-specific charges are not included in NAV return.

How often is a fund’s NAV typically updated and published?

For open-ended mutual fund schemes, NAVs are calculated for each business day based on the portfolio valuation and are published daily by the fund house.

Can a fund have a negative NAV return?

Yes. If the final NAV is lower than the initial NAV for a given period, the NAV return will be negative, reflecting market-related movements.

Is NAV return the only metric I should consider for fund selection?

NAV return may be reviewed along with other factors such as benchmark comparison, rolling returns, and scheme risk profile for a more complete assessment.

What is the difference between point-to-point NAV return and annualised NAV return?

Point-to-point return reflects performance over a specific period, while annualised return expresses multi-year performance as an approximate per-year measure.

Where can I find the official NAV data for Bajaj Finserv AMC funds?

NAVs of mutual fund schemes are published on the AMFI website, which consolidates daily NAV disclosures from all registered asset management companies. On the Bajaj Finserv AMC website, the NAV of each scheme is available on the respective scheme pages.