SEBI's new guidelines have mandated fund houses to declare intraday NAV of ETFs on a real-time basis. Here is what it means for you.
01-Jul-2022 •Deepika Saxena
The popularity of exchange-traded funds (ETFs) has been on a rise. However, one apprehension has been a source of worry for investors - figuring out whether they are buying and selling their ETF units at a fair value.
To provide some context, ETFs can be bought and sold on stock exchanges at the traded market prices just like equity shares. But notably, these market prices can (and often are) significantly different from their NAVs which are derived from the prices of the underlying securities they hold. For instance, a unit of an ETF may have an NAV of Rs 100 but it might be trading at a price of Rs 105 on the stock exchange. Clearly, in this case, an investor buying it on a stock exchange will end up paying a steep premium which is undesirable. The issue is further complicated by the fact that until now, there was no straightforward way for an investor to figure this out. That's because the NAV is only disclosed at the end of the day while the ETFs trade on stock markets on a real-time basis.
To address this issue, ETFs have been mandated to disclose intraday NAV (iNAV) starting today. We think this is a pretty useful addition for ETF investors as now they can compare the traded price with the iNAV on a real-time basis to figure out whether they are paying much more than the actual worth of the units. Likewise, a seller of ETF units will instantly know if the going price is at a steep discount to the underlying worth of the units.
For equity ETFs, the iNAV would be declared within a maximum time lag of 15 seconds from the underlying market. For debt ETFs, the iNAV would be declared at least four times in a day with a minimum time lag of 90 minutes between the two disclosures. For gold and silver commodity ETFs, iNAV disclosed may either be static or dynamic depending upon the availability of the underlying price. Similarly, for ETFs tracking international indices, iNAV disclosed may be static or dynamic depending on the intersection in trading hours of domestic and overseas markets.
You can get the iNAV from the stock exchange's website (see below screenshot), or even the websites of the AMCs. Hopefully in times to come, prominent stock brokers would also be providing this information on their platform.
Make use of it to make more informed investment decisions.