Return Calculation Methodology
Return Calculation Methodology
Portfolio returns are calculated using the Portfolio NAV
Portfolio NAV represents the normalized value of the model portfolio assuming an initial capital of ₹ 100. Changes in Portfolio NAV reflect the performance of the strategy based on price movement of constituents and periodic portfolio rebalancing.
Returns displayed on the platform are derived from changes in Portfolio NAV over time using end-of-day closing prices of constituents. When a position is initiated or rebalanced, quantities are calculated using the previous trading day closing prices, and daily returns are measured from previous close to current close.
Portfolio returns are calculated using the Portfolio NAV
Portfolio NAV represents the normalized value of the model portfolio assuming an initial capital of ₹ 100. Changes in Portfolio NAV reflect the performance of the strategy based on price movement of constituents and periodic portfolio rebalancing.
Returns displayed on the platform are derived from changes in Portfolio NAV over time using end-of-day closing prices of constituents. When a position is initiated or rebalanced, quantities are calculated using the previous trading day closing prices, and daily returns are measured from previous close to current close.
What is Portfolio NAV?
What is Portfolio NAV?
Portfolio NAV is a normalized value used to track the performance of the model portfolio across time. At the start date of the strategy, Portfolio NAV is set to ₹ 100. This represents a hypothetical investment of ₹ 100 allocated according to the portfolio weights.
Each constituent is assigned capital based on its target weight, and the number of shares is calculated using the previous trading day closing price prior to the start date.
This ensures that performance for the start date reflects the change from the previous close to the current close. Portfolio NAV on any trading day is equal to the total market value of all constituents based on their quantities. Quantities remain unchanged until the next rebalance.
Portfolio NAV is a normalized value used to track the performance of the model portfolio across time. At the start date of the strategy, Portfolio NAV is set to ₹ 100. This represents a hypothetical investment of ₹ 100 allocated according to the portfolio weights.
Each constituent is assigned capital based on its target weight, and the number of shares is calculated using the previous trading day closing price prior to the start date.
This ensures that performance for the start date reflects the change from the previous close to the current close. Portfolio NAV on any trading day is equal to the total market value of all constituents based on their quantities. Quantities remain unchanged until the next rebalance.
Example: Initial Portfolio NAV calculation
Assume the portfolio is created with the following weights:
Example: Initial Portfolio NAV calculation
Assume the portfolio is created with the following weights:
Initial NAV = ₹ 100
Allocation:
A = ₹ 50
B = ₹ 30
C = ₹ 20
Quantity calculation using previous close:
A = ₹ 50 / ₹ 10 = 5 shares
B = ₹ 30 / ₹ 15 = 2 shares
C = ₹ 20 / ₹ 5 = 4 shares
Closing prices on the start date:
Initial NAV = ₹ 100
Allocation:
A = ₹ 50
B = ₹ 30
C = ₹ 20
Quantity calculation using previous close:
A = ₹ 50 / ₹ 10 = 5 shares
B = ₹ 30 / ₹ 15 = 2 shares
C = ₹ 20 / ₹ 5 = 4 shares
Closing prices on the start date:
Portfolio NAV = ₹ 55 + ₹ 30 + ₹ 20 = ₹ 105
Return = 105 / 100 − 1 = 5%
This return reflects movement from previous close to current close.
Portfolio NAV = ₹ 55 + ₹ 30 + ₹ 20 = ₹ 105
Return = 105 / 100 − 1 = 5%
This return reflects movement from previous close to current close.
How is Portfolio NAV calculated daily?
How is Portfolio NAV calculated daily?
Portfolio NAV is updated on each trading day using the closing prices of constituents.
Portfolio NAV = Sum of (Quantity × Closing Price)
Daily return is calculated using close-to-close change in NAV.
Daily Return = (NAV today / NAV previous day) − 1.
Portfolio NAV is updated on each trading day using the closing prices of constituents.
Portfolio NAV = Sum of (Quantity × Closing Price)
Daily return is calculated using close-to-close change in NAV.
Daily Return = (NAV today / NAV previous day) − 1.
Example: Daily return calculation
Example: Daily return calculation
Previous day NAV = ₹ 100
Today NAV = ₹ 105
Daily Return = ₹ 105 / ₹ 100 − 1 = 5%
Next day NAV = ₹ 102
Daily Return = ₹ 102 / ₹ 105 − 1 = −2.86%
Previous day NAV = ₹ 100
Today NAV = ₹ 105
Daily Return = ₹ 105 / ₹ 100 − 1 = 5%
Next day NAV = ₹ 102
Daily Return = ₹ 102 / ₹ 105 − 1 = −2.86%
Return between any two dates
Return between any two dates
Return between two dates is calculated using NAV values on those dates.
Return = (NAV end / NAV start) − 1
Return between two dates is calculated using NAV values on those dates.
Return = (NAV end / NAV start) − 1
Example: Return between two dates
Example: Return between two dates
NAV on 1 Jan = ₹ 100
NAV on 1 Feb = ₹ 120
Return = ₹ 120 / ₹ 100 − 1 = 20%
NAV on 1 Mar = ₹ 108
Return from Feb to Mar = ₹ 108 / ₹ 120 − 1 = −10%
NAV on 1 Jan = ₹ 100
NAV on 1 Feb = ₹ 120
Return = ₹ 120 / ₹ 100 − 1 = 20%
NAV on 1 Mar = ₹ 108
Return from Feb to Mar = ₹ 108 / ₹ 120 − 1 = −10%
How rebalances affect Portfolio NAV?
How rebalances affect Portfolio NAV?
When the portfolio is rebalanced, the list of constituents or their weights may change. Portfolio NAV is not reset. The existing NAV is redistributed across the updated constituents according to the new weights.
Rebalances are applied using the previous trading day closing NAV and previous trading day closing prices.
On a rebalance day:
Previous day closing NAV is taken as the starting value
Quantities for the updated weights are calculated using previous trading day closing prices
Portfolio NAV at the end of the day is calculated using current day closing prices
Daily return reflects previous close to current close movement
From the next trading day onward, NAV continues to be calculated using closing prices. This approach ensures consistency in return calculation across all trading days.
When the portfolio is rebalanced, the list of constituents or their weights may change. Portfolio NAV is not reset. The existing NAV is redistributed across the updated constituents according to the new weights.
Rebalances are applied using the previous trading day closing NAV and previous trading day closing prices.
On a rebalance day:
Previous day closing NAV is taken as the starting value
Quantities for the updated weights are calculated using previous trading day closing prices
Portfolio NAV at the end of the day is calculated using current day closing prices
Daily return reflects previous close to current close movement
From the next trading day onward, NAV continues to be calculated using closing prices. This approach ensures consistency in return calculation across all trading days.
Example: Rebalance calculation
Example: Rebalance calculation
Previous NAV = ₹ 120
New weights:
Previous NAV = ₹ 120
New weights:
Previous NAV = ₹ 120
New weights:
Allocation using previous NAV:
A = ₹ 72
B = ₹ 48
Quantity calculation:
A = ₹ 72 / ₹ 20 = 3 shares
B = ₹ 48 / ₹ 10 = 4 shares
Closing prices on rebalance day:
Allocation using previous NAV:
A = ₹ 72
B = ₹ 48
Quantity calculation:
A = ₹ 72 / ₹ 20 = 3 shares
B = ₹ 48 / ₹ 10 = 4 shares
Closing prices on rebalance day:
Portfolio NAV = ₹ 66 + ₹ 56 = ₹ 122
Return = ₹ 122 / ₹ 120 − 1 = 1.67%
This return reflects previous close to current close movement after applying new weights.
Portfolio NAV = ₹ 66 + ₹ 56 = ₹ 122
Return = ₹ 122 / ₹ 120 − 1 = 1.67%
This return reflects previous close to current close movement after applying new weights.
Benchmark return calculation
Benchmark return calculation
Benchmark performance is calculated using the same NAV normalization approach. The benchmark is rebased to ₹ 100 at the strategy start date. Benchmark NAV is calculated using daily closing values of the benchmark index. Returns for the benchmark are calculated using the same close-to-close method used for the portfolio.
Actual investor returns may differ from model returns.
Benchmark performance is calculated using the same NAV normalization approach. The benchmark is rebased to ₹ 100 at the strategy start date. Benchmark NAV is calculated using daily closing values of the benchmark index. Returns for the benchmark are calculated using the same close-to-close method used for the portfolio.
Actual investor returns may differ from model returns.