These money market mutual funds beat bank fixed deposits

These money market mutual funds beat bank fixed deposits

by 5paisa Research Team Last Updated: Dec 12, 2022 - 08:48 am 16.3k Views
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People usually opt for bank fixed deposits (FD) for the safety of the principal. However, what if we say these top three money market funds beat bank FD and also carry lower risk? Read on to find out more.

Bank Fixed Deposit (FD) is one of the most conventional avenues of investing. In fact, most of the earlier generation population still prefer bank FDs as their primary investment option followed by government schemes.

According to the survey of the Securities and Exchange Board of India (SEBI) in 2019, 95% of Indian families prefer investing in bank FDs. Moreover, as per Statista, individuals held over Rs 46 lakh crore as individual assets in bank FDs in the financial year 2020.

This shows how popular bank FDs are in India. Below is the table listing top bank FDs with higher interest rates. It is to be noted that these interest rates are for investments below Rs 2 crore. 

Name of Bank 

General Citizens (% p.a.) 

Senior Citizens 

(% p.a.) 

RBL Bank 

7.0 

7.5 

Bandhan Bank 

7.0 

7.5 

Yes Bank 

6.8 

7.5 

IndusInd Bank 

6.8 

7.5 

Duetsche Bank 

7.0 

7.0 

IDFC First Bank 

6.9 

7.4 

HDFC Bank 

6.1 

6.6 

Punjab National Bank 

6.1 

6.6 

Axis Bank 

6.1 

6.8 

Canara Bank 

6.0 

6.5 

HSBC Bank 

6.0 

6.5 

IDBI Bank 

5.8 

6.5 

Kotak Mahindra Bank 

5.9 

6.4 

Bank of Baroda 

5.5 

6.5 

State Bank of India 

5.7 

6.5 

Indian Overseas Bank 

5.8 

6.3 

UCO Bank 

5.6 

6.1 

Indian Bank 

5.6 

6.1 

* Interest rate for investments below Rs 2 crore. This is the maximum interest rate offered by the respective bank. These are pre-tax interest rates

 However, these top three money market funds delivered average three-year rolling returns of 7% to 7.2%. The three-year rolling returns have been calculated for the period from September 19, 2014, to September 19, 2022.  

3-Year Rolling Returns | Period: September 19, 2014 to September 19, 2022 

Fund Name 

Mean (%) 

Maximum (%) 

Minimum (%) 

Aditya Birla SL Money Manager Fund 

7.24 

7.91 

5.09 

Nippon India Money Market Fund 

7.09 

7.74 

4.94 

HDFC Money Market Fund 

7.02 

7.71 

5.02 

Source: RupeeVest 

As can be seen in the above table, the maximum returns generated were between 7.7% to 8%. And minimum returns generated were around 5%.

Furthermore, if we analyse this rolling returns data, then we can see that none of the abovementioned funds has generated negative returns. analysing its calendar year returns, then only in the year 2021 it generated returns of around 4%. In the rest of the years, these funds generated returns between 6% to 10% on average.

Having said that, even on the post-tax basis returns of 7% in three years can be expected. This is due to the efficient taxation of debt funds as against bank FDs.

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About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

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