An Exchange Traded Fund, or ETF, is a simple way to invest, where there is a basket that holds different types of stocks like Nifty 50 ETF which holds shares of the top 50 companies of India. When you invest in one unit of the ETF you get small pieces of all 50 companies in one go.
As ETFs are similar to stocks in terms of price change, in an ETF the price also changes every second but how can you decide which exact price is fair for you making an investment. Here comes the role of Indicative Net Asset Value (iNAV) or in simpler terms you can refer to it as live MRP for an ETF as it shows you the real-time fair price of one unit and gets updated in every few seconds.
What is iNAV in ETFs and How Does It Work?
iNAV or Indicative Net Asset Value or to make it more easy to understand it is the real time fair price of one unit of an ETF which gets updated every 15 seconds in India while the market is open.
The main job of an iNAV ETF is to be your guide. It helps you to show what one unit of the ETF should be worth at any moment, based on the live prices of all the stocks inside its basket. You can look at the iNAV and compare it with the actual trading price on your screen to see if you’re getting a good deal.
How does iNAV Works?
Let’s understand how an iNAV works by using a simple example:
Let’s assume an ETF basket only has two company stocks, one is share of Company A and one is share of Company B. To calculate the iNAV, the system constantly checks the live market price of both stocks. It adds them up, makes tiny adjustments for any cash or expenses, and then shows you the fair value of one ETF unit automatically.
This gives you a transparent, live value for you to invest in your desired ETFs. This is needed because an ETF is a mix as it trades like a stock, but is actually built like a fund. A normal mutual fund’s price is set only once a day. But since you trade ETFs with other people all day, a once-a-day price is not enough and iNAV solves this problem.
Read Also: Best ETFs in India to Invest
Difference Between NAV vs iNAV
NAV is like the snapshot of information that you get once or typically at the end of the day on the other hand iNAV gives you live updates about all the latest happenings throughout the day. Here are some of the main differences between the both:
- Calculated: NAV is calculated only once a day, after the market closes whereas iNAV is calculated throughout the day in every 15 seconds.
- Product Compatibility: NAV is for traditional mutual funds and iNAV is specially made for ETFs because they trade all day.
- Usage: For mutual funds, NAV is the actual price at which traders buy or sell. iNAV is just a guide to check the fairness of the market price for the ETFs as here you trade at the market price, not the iNAV.
| Feature | NAV (net asset value) | iNAV (Indicative net asset value) |
|---|---|---|
| Calculation Time | Once a day, after the market closes. | Every 15 seconds during market hours. |
| Portrays | The final, official price for the day. | A live, estimated fair value. |
| Usage | Traditional Mutual Funds. | Exchange-Traded Funds (ETFs). |
| Relivance | The actual price you buy or sell at. | A guide to check if the market price is fair. |
Why is iNAV Important for You?
Let’s understand this by looking at a few points related to iNAV.
- Fair Price Detection: ETFs do not have an exact underlying value, either it can be priced higher (at premium) or lower (at discount) as using iNAV you can spot the differences in real-time, helping you know the fair price of the ETF.
- Avoid Overpaying: Using iNAV helps traders with choosing the right fair price as it helps in ensuring that the traders get to know the correct ETF price and not lose money by paying more than it’s worth.
- Unlock Opportunities: iNAV is essential for traders who trade throughout the day, as it helps in highlighting the price discrepancies which creates opportunities for arbitrage, the strategy of buying an asset at a lower price and selling it for a higher one almost instantly.
- Provides Confidence: If you are planning to hold your ETFs for years iNAV offers valuable transparency because it confirms that your investment is being valued fairly and helps you track your portfolio by telling you if it is on the right path or not.
- Crucial for Global ETFs: Global ETFs are susceptible to different prices, currency and even time zone, iNAV helps in comparing all these factors and gives you the information so that you can make an informed decision while buying or selling these global funds.
Read Also: Small-Cap ETFs to Invest in India
How to Track iNAV in Real Time?
It’s very easy to check the iNAV. Here are the best places to find it:
- AMC Websites: You can directly check the official website of the fund house (AMC) that runs the ETF as it is one of the most reliable sources. For example, you can go to the websites of Zerodha Fund House, Motilal Oswal, or Mirae Asset to see the live iNAV for their ETFs.
- Stock Exchange Websites: Both NSE and BSE helps the traders by showing the iNAV on their websites. You just need to look for the term “i-NAV” on the ETF’s page.
- Your Trading App: Most trading apps like Zerodha Kite or Pocketful also show the iNAV, but be a little careful, as the data can sometimes be slightly delayed and a fraction of seconds can give you a different result, so if you are making any big investments then always cross check it on the AMC’s website.
Advantages of iNAV
- Real Picture: iNAV gives you a live, transparent view of an ETF’s fair price.
- Better Decisions: It helps the traders in making better decisions whether to buy or sell if the ETF is overpriced (premium) or underpriced (discount).
- Keeps Informed: It protects investors from accidentally paying too much price, especially during the bullish market.
Disadvantages of iNAV
- No real price: You can check the price but you can’t place an order to buy at the iNAV as it is just for your market price reference and remember trades will always happen at the real market price.
- Delays: The iNAV updates every 15 seconds and in a very fast-moving market, even this tiny delay means the iNAV might be a little behind the real value, so always consider this.
- The International Problem: For ETFs that hold foreign stocks (like US stocks), the iNAV can be tricky. While calculating the US market’s ETFs and if the market is closed, iNAV generally uses the previous day’s price making it less useful.
Read Also: What is Nifty BeES ETF?
Conclusion
iNAV is a simple but very powerful tool for anyone investing in ETFs as it functions as a guide for your busy stock market schedule. It makes investing clearer and gives power to every investor, whether you are a beginner or an expert.
Remember as a good investor you always need to compare the market price with the iNAV before you click the buy or sell button. This two-second check can save you from bad deals, keep you calm when the market is shaky, and protect you from costly mistakes.By understanding simple ideas like iNAV, you are taking control of your money and making smarter choices for your future.
Frequently Asked Questions (FAQs)
Difference between NAV and iNAV?
NAV is the official price for a mutual fund, calculated once a day after the market closes. iNAV is a live, estimated price for an ETF, updated every 15 seconds during the day to act as a guide.
If an ETF’s market price is much higher than its iNAV, should I invest in it or not?
If the price is much higher than the iNAV, it means you are overpaying so it’s better to wait for the price to come closer to the iNAV before you make your investment.
How often is iNAV updated in India?
For stock ETFs in India, the iNAV is updated at least every 15 seconds during market hours.
Is iNAV always 100% correct?
It’s a very close estimate, but not perfect. There can be a small delay, also for ETFs with international stocks, the iNAV can be based on old prices if the foreign market is closed, which makes it less accurate at that time. Use it as a reliable guide, not a perfect number.
Where can I check iNAV?
You can directly look for the iNAV from the official websites of the fund houses (AMC) which manages the ETF. Or you can also go on the stock exchange websites like NSE OR BSE to know the fair prices of your desired ETF funds.
