An investor submits a purchase application of Rs. 50,000 for an equity fund at 11:30 AM on Monday (a business day). The application money is cleared and available for utilization in the scheme account at 1:45 PM on Tuesday. What is the applicable NAV for the unit allotment?

[ A ]Closing NAV of Monday (the day the physical application was submitted)

[ B ]Closing NAV of Tuesday (the business day on which funds are available for utilization before 3:00 PM)[ CORRECT ]

[ C ]Closing NAV of the preceding Friday

[ D ]Closing NAV of Wednesday irrespective of funds realization

Takeaway

Option B is correct: Closing NAV of Tuesday (the business day on which funds are available for utilization before 3:00 PM)

Derivation

Under SEBI's uniform NAV applicability rule (effective for transactions of ANY amount in all equity and debt schemes other than liquid/overnight), the applicable NAV is the closing NAV of the business day on which the funds are available for utilization in the scheme bank account before the 3:00 PM cut-off time, irrespective of when the application was submitted. Since funds cleared at 1:45 PM on Tuesday (before 3:00 PM), Tuesday's closing NAV applies. This tests funds realization rules. The primary error is assuming application timestamp dictates NAV.

Why the others fail

A — Closing NAV of Monday (the day the physical application was submitted)

Monday's NAV cannot be allotted because funds were not available for utilization in the scheme account on Monday before 3:00 PM.

C — Closing NAV of the preceding Friday

Historical Friday NAV is irrelevant and cannot be allotted for a new purchase application submitted the following week.

D — Closing NAV of Wednesday irrespective of funds realization

Wednesday's NAV is not applied because funds were successfully realized before the 3:00 PM cut-off on Tuesday.