When Income Distribution Capital Withdrawal (IDCW) schemes pay dividends, your NAV reduces by the exact amount of dividend distributed per unit.
How the NAV reduction works
The NAV drops because the fund distributes part of its assets to you as dividends. This reduction happens automatically on the dividend payment date.
Example scenario
- NAV before dividend: ₹15
- Dividend paid per unit: ₹5
- NAV after dividend: ₹10
Your total investment value remains the same because you receive the ₹5 dividend in cash while your remaining units are now valued at ₹10 each.