I invested Rs 40,000 in Magnum Taxgain (dividend payout option) on March 2, 2007. Though I got the units at Rs 54.75 (NAV), the statement shows the NAV at Rs 53.55. Subsequently, I received dividend warrants @ Rs 11 per unit. Now I have found that the NAV on that date was 42.55, a difference of Rs 11. My agent says that I was issued units at higher price because the dividend was also included. Kindly explain the logic behind this.
- Jaideep
Your agent is right. There's nothing wrong with your transaction. You bought the units of the funds when its NAV was Rs 53.55 (including the dividend) plus the 2.25 per cent load which makes it Rs 54.75. You got the dividend of Rs 11 on the record date. As your date of allotment also happens to be the record date, the NAV came down exactly by the amount of dividend paid. Effectively, you got a part of your money back by way of dividend while you can claim income deduction on the total amount invested in the fund.
This article was originally published on September 26, 2007.
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