NAV vs iNAV vs Market Price: Why Your ETF Price Isn't What You Think
Investing Writer
Open your broker's app, search for an ETF, and you'll see a single price. Simple enough. But behind that one number are actually three different prices working together — NAV, iNAV, and the market price you're about to pay. Most investors never learn the difference until they end up paying more than they should have, usually during a volatile trading session.
Here's what each of these actually means, and why the gap between them matters more than most people realize.
Start With NAV: The "Official" Value
Net Asset Value (NAV) is the true, calculated value of one ETF unit — worked out by the fund house at the end of each trading day, based on the closing prices of everything the ETF holds, divided by the total number of units outstanding. This is the same NAV concept used for mutual funds, and it's published once a day, after markets close.
The problem is, NAV tells you what an ETF was worth at yesterday's close — not what it's worth right now while markets are open and you're trying to place an order.
Enter iNAV: The Real-Time Estimate
This is where Indicative NAV (iNAV) comes in. iNAV is a continuously updated, real-time estimate of what the ETF's fair value should be, calculated throughout the trading day based on the live prices of the underlying securities. Exchanges typically refresh this figure roughly every 15 seconds during market hours, giving traders a live benchmark to check against.
Think of iNAV as NAV's live, working estimate — updated constantly instead of once a day, so you have some sense of fair value while the market is actually open.
Then There's the Market Price: What You Actually Pay
The market price is simply whatever price buyers and sellers are currently agreeing to trade at on the exchange. Unlike iNAV, which is a calculated estimate, market price is a real, live number determined purely by supply and demand — and this is the number that actually determines what you pay when you place an order.
Why Market Price and iNAV Don't Always Match
In a well-traded, liquid ETF, the market price usually stays very close to iNAV, because there's enough buying and selling activity to keep the two aligned. But gaps can — and do — appear, especially when:
- The ETF has low daily trading volume, meaning fewer active buyers and sellers to keep the price anchored to fair value
- A sudden news event moves the underlying index quickly, and the market price reacts faster than iNAV updates can keep pace
- Authorized participants or market makers aren't actively arbitraging the ETF that particular day
When this gap widens, you can end up buying at a noticeable premium over fair value, or selling at an unnecessary discount — without realizing it, if you're only looking at the last traded price.
A Practical Example
Say an ETF's iNAV shows ₹100 based on its underlying holdings, but due to low liquidity that morning, the last traded price on the exchange is ₹101.50. If you place a market order without checking iNAV, you'd pay a 1.5% premium over fair value on that single trade — an avoidable cost that has nothing to do with the index's actual performance.
How to Actually Use This Information
| What to Check | Why It Helps |
|---|---|
| iNAV (if your broker displays it) | Tells you the ETF's current fair value estimate, not just the last traded price |
| Bid-ask spread in the order book | A wide spread often signals lower liquidity and higher risk of a bad fill |
| Average daily trading volume | Higher volume generally means the market price stays closer to iNAV |
| Limit order instead of market order | Lets you cap the price you pay, rather than accepting whatever's available |
Why This Matters More For Some ETFs Than Others
Broad market ETFs tracking widely-followed indices like the Nifty 50 tend to have tight, well-arbitraged spreads, since so many participants are actively trading them. Sectoral, thematic, or niche international ETFs — with naturally thinner trading volumes — are far more prone to noticeable price-iNAV gaps. If you're investing in anything outside the most heavily traded, broad-market ETFs, this is worth double-checking before every order, not just occasionally.
What This Doesn't Mean
None of this means ETFs are inherently risky or poorly designed — the creation/redemption mechanism that authorized participants use is specifically built to keep market price aligned with NAV over time. It just means that on any given day, especially in less-liquid funds, there can be a temporary gap worth watching for, particularly around large orders or volatile sessions.
The Bottom Line
NAV tells you what an ETF was worth at yesterday's close. iNAV estimates what it's worth right now. Market price is what you'll actually pay. For a liquid, broad-market ETF, these three numbers usually stay close enough that it barely matters. But the moment you're trading a less-liquid ETF, or trading during a volatile session, checking iNAV against the live market price — and using a limit order instead of a market order — can be the difference between a fair trade and an avoidable, invisible cost.
If you want to go deeper into how this ties into your ETF selection process, it's worth reading through how ETFs are priced and traded and why liquidity matters when choosing an ETF before placing your next order.