Mark-to-Market
Why NAV moves every day — the portfolio is repriced to the market at each day's close.
Why you care
A fund's NAV isn't an opinion or a target price. At each day's close the fund takes every holding, marks it to the price it actually traded at that day, and totals it up. That repriced total, divided by units, is the NAV. This is why NAV moves even on days you did nothing.
Run the numbers
A fund holds 1 lakh shares that closed up ₹5 today. Marked to market, that's ₹5 lakh more in the portfolio, so net assets rise by ₹5 lakh and NAV ticks up accordingly (illustrative). Tomorrow the same shares might close down, and NAV falls. The movement is just the market, retallied.
Where this goes
Mark-to-market is the input to NAV: reprice the portfolio, divide by units, and you have today's price. It's also why debt funds — often assumed "safe" — can still show a down day: when yields move, the bonds they hold are marked to a lower price, and the NAV reflects it.
Why you care
Mark-to-market is the daily discipline of valuing a fund's portfolio at the prices its holdings can actually be sold for, rather than what the fund paid for them. Every equity share is valued at its closing price; every bond is valued at a price derived from where similar bonds are trading. Do that across the whole portfolio, subtract liabilities, divide by units, and you get the NAV.
The key point: NAV is a consequence, not a decision. Nobody at the AMC "sets" tomorrow's NAV. The market moves the prices of the underlying holdings, the fund retallies them at close, and the NAV falls out of that arithmetic. This is also the honest answer to "why did my fund drop when I didn't sell anything" — you didn't have to. The holdings were repriced under you.
Run the numbers
A fund holds 1,00,000 shares of a company, bought at ₹200, plus ₹10 lakh in cash (illustrative). Today the share closes at ₹205.
- Shares marked to market: 1,00,000 × ₹205 = ₹2.05 cr (up from ₹2.00 cr).
- Add cash: ₹10 lakh.
- The ₹5 lakh gain flows straight into net assets, and NAV rises by that ₹5 lakh spread over the units.
Nothing was bought or sold. The value changed because the market price changed and the fund is required to reflect it the same evening. The identical mechanism runs in reverse on a red day, and it's exactly why a debt fund can lose value. Rising interest rates push down the market price of the bonds it holds, and mark-to-market carries that fall into NAV.
Where this goes
Mark-to-market feeds directly into NAV — it is the daily repricing step that produces the number. Understanding it removes two common confusions at once: that NAV is somehow managed or smoothed, and that debt funds can't fall.