Open-Ended Fund
An open-ended mutual fund has no fixed maturity date and allows investors to subscribe or redeem units at the prevailing NAV on any business day. It is the most common fund structure in India under SEBI Mutual Fund Regulations 1996.
An open-ended fund (also written as open-end fund) is a mutual fund scheme with no fixed maturity date that continuously offers and redeems units at the prevailing Net Asset Value (NAV) on every business day. This structure is governed by SEBI Mutual Fund Regulations, 1996 (as amended), and is the dominant fund structure in India — accounting for over 95% of total mutual fund AUM as per AMFI data.
How the category is defined
SEBI Mutual Fund Regulations 1996 define an open-ended scheme as one that offers units for sale and redemption on a continuous basis. Key regulatory requirements include:
- Daily NAV declaration: All open-ended equity and hybrid funds must declare and publish NAV daily (every business day). Debt fund NAVs are also declared daily. NAV calculation methodology is specified in the Sixth Schedule to the Regulations.
- Liquidity guarantee: Investors must be able to redeem units within one business day of the applicable NAV cut-off time for liquid funds, and within two to three business days for equity and other fund types (T+2/T+3 settlement), following SEBI Circular SEBI/HO/IMD/DF4/CIR/P/2019/093 (time-stamping and cut-off rules).
- No lock-in (except ELSS): Standard open-ended funds have no mandatory lock-in. Equity-Linked Savings Schemes (ELSS), while structured as open-ended funds, carry a statutory 3-year lock-in per Income Tax Act 1961, Section 80C.
- Exit load: AMCs may levy exit loads (typically 0–1% for equity funds within 1 year of purchase) as permitted under SEBI regulations. Exit loads are credited back to the scheme, not retained by the AMC.
Contrast with close-ended funds, which have a fixed maturity, NFO-only entry, and no continuous redemption.
What investors should look at
- Cut-off timing for NAV applicability: For equity funds, applications received before 3:00 PM (IST) on a business day get the same-day NAV; applications after 3:00 PM get next-business-day NAV. For liquid funds, inflow timing rules are more granular (SEBI Circular SEBI/HO/IMD/DF4/CIR/P/2019/093).
- Exit load period and charge: Many equity open-ended funds levy 1% exit load within 12 months. Factor this into short-horizon planning — though ELSS is a distinct case with mandatory lock-in rather than discretionary exit load.
- Systematic investment options: Open-ended funds support SIP, SWP, and STP — structured cash-flow mechanisms that are not available in close-ended fund structures.
- Liquidity in debt open-ended funds: While equity open-ended funds are liquid under normal conditions, certain debt fund categories (credit risk, FMP-converted open-ended) may face redemption stress under credit events. Review the liquidity risk framework in the Scheme Information Document (SID).
Worked example
An investor places a redemption request for 1,000 units of Axis Bluechip Fund – Direct Plan at 2:45 PM on Tuesday, 1 April 2025:
- Cut-off time: 3:00 PM (IST) for equity funds.
- Applicable NAV: Tuesday, 1 April 2025 closing NAV.
- Redemption proceeds received: Thursday, 3 April 2025 (T+2 settlement for equity funds).
- Credit to registered bank account: 3 April 2025, typically during banking hours.
If the same investor had submitted the request at 3:15 PM, the applicable NAV would have been Wednesday, 2 April 2025, with proceeds arriving on Friday, 4 April 2025.
See also
Primary source
SEBI (Mutual Funds) Regulations, 1996 — available at: sebi.gov.in. SEBI Circular SEBI/HO/IMD/DF4/CIR/P/2019/093 (Cut-off timing): sebi.gov.in. AMFI monthly AUM data: amfiindia.com.
Past performance is not indicative of future returns. Mutual fund investments are subject to market risks. Read all scheme-related documents carefully. ARN-314872. APMI APRN-01658. Content is informational and not investment advice.