How does NAV calculated in ULIPs like LIC,ING and SBI Life ?

What is the relation between NAV and SENSEX points ? How do u calculate it, explain ?

How does NAV calculated in ULIPs like LIC,ING and SBI Life ?
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2 Replies to “How does NAV calculated in ULIPs like LIC,ING and SBI Life ?”

  1. There is no direct or indirect relationship between NAV and Sensex (BSE) or Nifty (NSE index). It works like below:

    First Sensex or Nifty (stock exchange Index). Here the Index is calculated on the basis of limited number of stocks (30 for BSE and 50 for the Nifty). it is calculated with base as 100 on a given date. Thus, for Sensex, the price of these 30 stocks on the baseline date is taken as base (weightage) and index is 100 on that date. Then onwards, every movement in the price of any or all of these 30 stock affect the index value based on individual weightage they have.

    Turning to NAV, simply put, it is the total value of stocks in which the fund has invested divided by the number of units that have been issued to public. Thus, if the total value of investment of a fund is 10,00,000 and number of units issued to public is 100000 (i.e. NAV 10 per unit).. and then due to share prices going up or down say after one year the total value of investment comes to 12,00,000 then the NAV is said to be 12 per unit.

    Sensex is based on limited number of stocks that have been incorporated in calculating the index. The NAV depends on actual stock investment made by a fund – may be in to sensex stocks and other stocks as well.

  2. The sensex is calculated based on the prices of the companies that feature in the index.

    the nav is calculated in a slightly different manner.

    Mr. X who has a lot of experience in the share market decides to start a MF. He calls for prospective investors. Say investors A, B, C, D & E decide to invest Rs. 10000/- each, Mr. X would be starting his MF with a corpus of Rs. 50000/- X would be creating MF units of face value Rs. 10/- each and distribute it to all the investors. So each A, B, C, D & E would get 1000 units each.

    Inv amount = 10000 & Unit Face Value (NAV) = 10

    ==> No. of units given = 1000 (I have not taken into account the entry load since this is only a theoritical example)

    Using this Rs. 50000/- X would buy/sell shares and make profit. At the end of each trading day X would calcuate the total net worth of the initial investment. Say after 1 month of trading, the total value of the investment is Rs. 58000/- then the current NAV of the fund would be Rs. 11.60/- which means each of the investors has made a profit of Rs. 1.60 per unit they bought from Mr. X.

    Note: This 58000 would be the amount that is arrived at after subtracting the profit margin that Mr. X would take for using his expertise in forming this MF and making profit. This profit margin would vary from fund to fund but has an upper cut off set by SEBI.

    Say after one succesful year of operation the Net assets in the MF stands at Rs. 1,00,000/- then the NAV on that day would be Rs. 20/-

    Hope you understood. This is for a mutual fund. the NAV of a ULIP is calculated in exactly the same way.

    mail me at [email protected] if you need any more details.

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