Net asset value (NAV) represents a funds per share market value. This is the price at which investors buy ("bid price") fund shares from a fund company and sell them ("redemption price") to a fund company. It is derived by dividing the total value of all the cash and securities in a funds portfolio, less any liabilities, by the number of shares outstanding. An NAV computation is undertaken once at the end of each trading day based on the closing market prices of the portfolios securities.For example, if a fund has assets of INR 50 million and liabilities of INR 10 million, it would have a NAV of INR 40 million. The NAV is the important in terms of share trading this number is important to investors, because it is from NAV that the price per unit of a fund is calculated. By dividing the NAV of a fund by the number of outstanding units, you are left with the price per unit. If the fund has 4 million shares outstanding, the price-per-share value would be INR 40 million divided by 4 million, which equals INR 10. Because mutual funds distribute virtually all their income and realized capital gains to fund shareholders, a mutual funds NAV is relatively unimportant in gauging a funds performance, which is best judged by its total return.NAVs are helpful in keeping an eye on your mutual funds price movement, but NAVs are not the best way to keep track of performance. The reason for this is mutual fund distributions. Mutual funds are forced by law to distribute at least 90% of its realized capital gains and dividend income each year. When a fund pays out this distribution, the NAV drops by the amount paid. This is important because an investor may become frightened when they see their funds NAV drop by INR 3 even though they havent lost any money (the INR 3 was paid out to the shareholder).The most important thing to keep in mind is that Mutual Fund NAVs change daily and are not a good indicator on how your portfolio is doing because things like distributions mess with the NAV (it also makes mutual funds hard to track)