How is it calculated?

The total assets of a mutual fund usually falls into two categories – cash and securities. Securities
include stocks and bonds. So the total asset will include the market value of all its cash, stocks,
and bonds. Liquid assets, dividends to be received, interest accrued also need to be included in the
total assets.
At the same time, the mutual fund will have some money that it will owe to some creditors. That
is its liabilities. There will be some expenses that has accrued over time and yet to be paid, this
also needs to be included.
Let us see that in a formula.
Net Asset Value (NAV) = (Assets – Debts) / (Number of Outstanding units)
Where
Assets = Market value of the fund’s investments + Receivables + Accrued Income
Debts = Liabilities + Accrued Expenses
The market value of stocks and debentures is taken as the closing price on the major stock
exchange where it is listed.
Example
As an example, assume there are two investors X and Y who have invested in a mutual fund which
decided to issue out units at Rs 1/-.
X invests Rs 100/- and Y invests Rs 200/-.
The total corpus of the mutual fund will be Rs 100 + Rs 200 = Rs 300/- and X will get 100 units
and Y will get 200 units.
Now suppose the mutual fund manager invests smartly over a year and makes the investment grow
and the corpus becomes Rs 800/-.
The NAV will be calculated as :
NAV per share = (Assets – Debts) / ( Number of Outstanding Units)
= (Rs 800/- 0) / (300)
= 2.67
The NAV is 2.67.
So X’s value of investments will be 100 units * 2.67 = Rs 267/- and
Y’s value of investments will be 200 units * 2.67 = Rs 534/-.
In reality of course, there are liabilities and expense ratios to be taken care of, this is an example
just for simplicity.
Other points to note

The NAV of a fund is calculated by the mutual fund house itself and in some cases by some
accounting firms that the mutual fund might hire for this purpose.
Usually, the calculation of a NAV is impossible during market hours as the price of the underlying
holdings (say stocks) keeps changing. Though the NAV can be calculated, it would change the
next minute or second. Given this, NAVs are usually declared after market closing hours once a
day.
As per the regulator SEBI’s guidelines, all mutual funds are required to publish the NAV of their
schemes at least once a week and in two leading newspapers.
Note that the NAV is arrived at after deduction of the Expense Ratio of a mutual fund. The expense
ratio is the total amount of annual expenses incurred by a mutual fund and it includes the
management fee and operating expenses like the registrar and transfer agent fee, marketing and
distribution fee, audit fee and custodian fee.
- See more at: http://www.thewealthwisher.com/2011/09/13/how-is-mutual-fund-net-asset-value-
nav-calculated/#sthash.xUEukpr9.dpuf