How are SWP redemption units calculated?
The number of units redeemed for SWP is determined based on the NAV of the previous trading day, i.e. T-1. To learn more about NAV, see What does NAV mean?
To calculate the redemption units for a monthly SWP, the formula is: Redemption units = SWP amount/ T-1 day’s NAV.
If a client has a monthly SWP of ₹500 scheduled for the 5th of each month, the redemption order will be calculated using the NAV from the 4th (T-1). If the NAV on the 4th (T-1 day) is 15, and the client wants to redeem ₹500, the calculation is:
Redemption units = ₹500 / 15 = 33.33 units
So, the client would place a redemption order for 33.33 units on the 5th, and the actual redemption would be processed using the NAV of the 5th.