Calculate your SIP ReturnsExplore

Mutual Funds and the June 4 NAV Issue: Tracking Error

20 June 20245 mins read by Angel One
This article delves into the events and reasons behind the June 4 NAV issue that left mutual fund investors facing notional losses, exploring the root causes and the responses.
Mutual Funds and the June 4 NAV Issue: Tracking Error
ShareShare on 1Share on 2Share on 3Share on 4Share on 5

On June 4, the Indian equity markets experienced a sharp downturn, presenting a buying opportunity for many investors. However, several mutual fund investors who placed buy orders before the deadline were dismayed to find that their transactions were processed at the next day’s Net Asset Value (NAV), resulting in significant notional losses. The rebound of the markets the following day exacerbated these losses, raising questions about the transaction process and the responsibilities of the involved parties.

Market Volatility and Investor Actions

The Indian equity markets have been notably volatile, swinging between significant highs and lows. On June 4, the markets crashed, prompting domestic investors to buy on the dip. These investors expected their mutual fund units to be allotted at the June 4 NAV, given that they placed their orders before the cut-off time. However, due to delays in transaction processing, many received units at the June 5 NAV instead. This discrepancy was particularly impactful as the benchmark Nifty 50 surged by 3.4% on June 5, after falling nearly 6% the previous day.

Transaction Processing and Delays

The main issue at hand was a delay in the processing of mutual fund transactions. According to current norms, for investments in equity mutual fund schemes, units are allotted to investors at the same-day NAV, provided the mutual fund receives the funds before the cut-off time of 2 p.m. When an investor places a buy request, the bank is notified and the investor’s account is debited. The bank then transfers the funds to a payment aggregator, which subsequently transfers them to the mutual fund’s account. These settlements occur at periodic intervals.

On June 4, the volume of transactions surged, causing delays in the transfer of funds by banks and payment aggregators. This delay meant that many transactions were not completed in time for the same-day NAV allotment. The BSE StAR MF, the online order collection system for mutual funds, initially faced scrutiny but clarified that the issue was not due to a system glitch but rather a lag in receiving payment details from aggregators and banks.

Institutional Responses

In response to the situation, the Association of Mutual Funds in India (AMFI) has been investigating the issue. Venkat Chalasani, CEO of AMFI, emphasized that according to SEBI guidelines, the allotment of mutual fund units is based on when the fund house receives the money, not when the investor’s account is debited. This distinction explains why some investors did not receive the June 4 NAV despite placing their orders before the cut-off time.

The incident has highlighted the need for more robust transaction processing systems. Both the market regulator, SEBI, and the banking regulator may need to step in to address these inefficiencies and ensure timely transaction processing. The RBI Deputy Governor, T. Rabi Sankar, mentioned ongoing efforts to reduce downtime in the Unified Payment Interface (UPI) channel, which could play a role in mitigating such issues in the future.

For now, investors seeking redressal have the option to log complaints on the SEBI Complaint Redressal System website. AMFI has forwarded investor complaints to mutual fund houses, who are examining the transactions. If it is found that funds were received on time, the mutual funds may allot the units at the correct NAV.


The June 4 NAV issue has underscored the complexities and vulnerabilities in the mutual fund transaction process, especially during periods of high market volatility. While the delays were primarily caused by the high volume of transactions overwhelming banks and payment aggregators, the incident has spurred a call for improved real-time transaction capabilities. This situation serves as a reminder of the importance of robust financial infrastructure in maintaining investor trust and market efficiency.

Elevate your savings strategy with our easy-to-use Angel One SIP Calculator. See the impact of consistent investing. Your future self will thank you. Start planning today!

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.

Grow Wealth, Start SIP Now!

Start Your Mutual Fund Investments Journey Today

Join our 2 Cr+ happy customers

Enjoy Zero Brokerage on Equity Delivery
Enjoy Zero Brokerage on Equity Delivery

Get the link to download the App

Send App Link
Open Free Demat Account!
Enjoy Zero Brokerage on Stock Investments.