Markets regulator Sebi's new directive, which requires mutual fund houses to allocate units upon realisation of funds irrespective of the ticket size, might impact systematic investment plans (SIPs) and cheque-based transactions, experts said on Friday.
However, it will not have any bearing on customers using online platforms for transactions.
They further said the new framework would bring uniformity on net asset value (NAV) allocation as it discontinues with the investment limit criteria and make it uniform for any amount of investment.
Currently, NAV for allocation of mutual fund units is based on investment amount. For investment below Rs 2 lakh, allotment of units is based on time of receipt of application within the cut-off time.
In case, the ticket size is above Rs 2 lakh, mutual fund houses allot units on realisation of funds -- when the scheme receives investor funds in their account.
Now, Sebi is requiring that they do it for all transactions, regardless of the amount.
"In respect of purchase of units of mutual fund schemes (except liquid and overnight schemes), closing NAV of the day shall be applicable on which the funds are available for utilisation, irrespective of the size and time of receipt of such application," according to a Sebi circular issued on Thursday.
Cut-off timings for applications enforced after the COVID-19 lockdown (12:30 pm for liquid and overnight schemes, 1:00 pm for all other schemes) remain the same.
The new framework will be applicable from January 1.
Primeinvestor.in co-founder Srikanth Meenakshi said there will be two big impact areas from the new framework.
He added that the first will be SIPs, as most of them are less than Rs 2 lakh and they will all have units allotted a day or two after the SIP date. It is because the money will be realised in the scheme account only the next day or the following day of the debit date at the bank, he said.
"This would affect the NAV assumptions made by portfolio tracking software used by investors," he added.
According to him, second impact area would be cheque-based transactions where asset management companies (AMCs) have been allotting units if the cheque was handed in by cut-off time.
Going forward, unit allotment will happen only after the cheque clears.
Customers using online platforms will not be affected since these have been the norms in those platforms even today, he added.
Making similar statements, Harshad Chetanwala of My Wealth Growth said the new framework may have an impact on SIPs as usually, the units are allotted on the date of SIPs and funds are received by schemes during subsequent days.
Currently, investors are assured of the NAV of the SIP day even if there is a delay in the money reaching the fund house.
Gopal Kavalireddi, head of research at FYERS, also said the change on fund availability with respect to NAV applicability could create issues, as investors would need to ensure that the funds are available and reach the fund house along with the application.
"Any delay in fund availability on the day of application will impact the NAV assigned for that investment.
"In the case of tier -1 and tier -2 cities and towns, banks and financial institutions can make necessary arrangements to comply with the regulations but the same might not be the case in smaller branches and tier-3 towns," he added.
Sanjiv Singhal, founder and chief product officer at Scripbox, said this should be welcomed by investors as a fair rule. Only once the AMC actually receives the money can they deploy it into investments and start earning.
"Previously, a cheque could take days to clear but the investor would start participating in fund growth from the day of application. This was, technically speaking, unfair to existing investors in the fund," he added.
Divam Sharma, co-founder at Sebi-registered Green Portfolio, said the new rule is a welcome step for the mutual fund industry. It will help AMCs reduce the impact cost of providing same-day NAVs and will have a positive impact on the returns delivered by their mutual fund schemes, he added.
However, this new rule will create some issue for those investors who submit orders close to the cut-off time, or face delay in payment settlement through nodal accounts, he said.
"The SIP money (which is mostly below Rs 2 lakh) might also get subsequent days' NAV if the cut-off timings are not met. We would await further clarity on what timings would qualify as 'money reaching the same day' as per Sebi circular," he added.
Also, the regulator has made it mandatory for fund houses to use an automated order management system and scheme-wise order placement in case the fund manager is managing several schemes. Kavalireddi said this is aimed at streamlining mutual fund operations.