After a gap of a few months, SEBI has reinstated that the cut-off time for NAV will be 3 pm. In such a case, what will happen if the markets remain volatile between the cut-off time at 3 pm and when the market closes at 3:30 pm? Also, how will we gain from the cut-off time of 3 pm instead of 1 pm, which was earlier told to be the realisation of the cheque or payment?
In the second question, the two things you are referring to are unconnected. There is a cut-off time for the allotment of NAV. So, if your money reaches the mutual fund by 3 pm as per the revised guidelines, then you will be eligible for that day's NAV. Only for the COVID-19 crisis, it was revised to 1 pm and 1:30 pm because transactions were taking time. So, only for this period, the timing was tightened and now it has been revised accordingly.
The other one was a different ruling, wherein mutual funds were no longer allowed to allot units based on that day's NAV up to investments of Rs.2 lakh without necessarily realising it. That announcement by SEBI remains in place which is a very fair system. Nobody should be allotted units without the mutual fund getting the money, as that would be unfair to other investors. Earlier, the rule was only applicable to investments over Rs.2 lakh. Now, it has been made applicable to all investments simply because it was not easy to implement earlier. With most people now making digital investments, the money is received by the fund company before the cut-off time for NAV allotment.
In the context of the first question about what happens between 3 and 3:30 in the case of volatility, we don't know. Earlier, the room for volatility was even more because the cut-off time was 1-1:30 pm and you had more than close to 2 hours before market closing and anything could have happened in between. But anyways, when you are investing in a mutual fund, you don't know the NAV.