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Overnight Mutual Funds

Overnight funds are the most recent addition to India’s available mutual fund (MF) categories. These open-ended funds invest in debt securities, Reverse Repos, and Collateralized Borrowing and Lending Obligation (CBLOs) with one-day (overnight) maturity. View More

Although retail investors can invest in overnight funds, these MFs are preferred by big institutional investors and corporate houses. Overnight funds returns are higher than current bank accounts and are less riskier than equity funds since they have minimal default and credit risks. The biggest advantage of overnight funds is that they are 100% liquid and can be bought and sold on the same day.

Best Overnight Mutual Funds

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Who Should Invest in Overnight Mutual Funds?

Overnight funds are the best investment instrument for high net worth investors and big financial institutions. These funds provide them with higher returns than conventional bank current deposits. Here is a lay down on the types of investors who prefer to invest in overnight mutual funds: View More

Investors with a super-low investment horizon can invest in overnight funds. These funds can be sold on the next day or any day you want.
If you are looking for a better investment option than a current account, overnight funds will suit you well. Corporate establishments and large financial institutions invest their idle or surplus cash in these funds for a few days until they need it for working capital requirements.
Investors looking to reap the benefits of STP or Systematic Transfer Plan can invest in overnight funds. Investors can transfer their money from an overnight fund to equity or pure debt funds using the STP facility.
Although retail investors can also invest in some of the best overnight funds, they prefer liquid funds. Liquid funds are like overnight funds, but they usually provide higher returns than overnight funds. Also, the credit and interest rate risks of liquid and overnight funds are similar.
Any investor willing to understand the fundamentals of the debt market before investing more money.
Any investor willing to get better post-tax returns than bank fixed deposits.
Any investor looking for a 100% liquid investment option with no exit load or fee for withdrawing prematurely.

Features of Overnight Mutual Funds

1-Day Maturity – Overnight funds are debt instruments with a maturity of one day. So, investors often move their capital from a current account to overnight funds to earn interest. View More

Risk-Free – Since overnight funds invest in debt instruments like debt securities, Reverse Repos, and CBLOs with one-day maturity, capital loss risks are minimal.
Extraordinary Liquidity – Like liquid mutual funds, overnight funds are 100% liquid, meaning investors can withdraw their money any time without paying any exit load.
Profit From Interest Rate Fluctuations – Overnight fund returns are directly proportional to interest rates. In a falling interest rate regime, overnight fund value declines. Conversely, these funds generate high returns when the interest rates rise.
Classification – According to SEBI, all funds in overnight mutual fund schemes are treated as ‘cash and cash equivalent.’ The portfolio of overnight funds changes every day. Moreover, overnight funds cannot invest in risky and volatile debt instruments.

Factors to consider while investing in Overnight Funds

Here is a list of factors you can consider before investing in overnight funds. View More

Money at Disposal
If you have some idle funds with you, you can look for investment options and earn a good return. Investing in overnight funds will allow you to earn more and gain some returns on the money sitting idle with you. Overnight funds allow you to earn profits within a short time frame.

Risk
Different investors have different risk-taking capabilities. Before investing in an overnight fund, the investors should understand the risks associated with the investment. While overnight funds are safe, they might have some risks.

If you are looking for short-term investments and are willing to take a moderate risk for the returns, you can invest in overnight funds. Also, if you take a conservative approach to risks, you can invest in overnight funds.

Market Volatility
Before choosing a fund to invest in, you must check the market volatility and how often it changes. Overnight funds have minimal impact if the interest rate changes or your credit ratings change.

The horizon of the investment in overnight funds is relatively short. Hence, you are protected against risks like changes in interest rates, credit risk, etc. The short horizon protects the investors against market volatility.

Liquidity
Before you invest in any fund, you must check how easily you can liquidate them. Overnight funds are very liquid. You can get back your money quickly without paying any exit load. Also, you will not have to compromise on the total investment amount.

Financial Objectives
Before investing in a particular fund, you must chalk out your financial objectives. If you are looking for a steady income for a mid or long-term, overnight funds might not be ideal. However, if you want quick money in a week or so, you can invest your money in overnight funds. Also, this might be a good choice if you are not an active investor and want to test the market.

Before you invest in an overnight fund, try to read about it. Before choosing an overnight fund, you must understand the risk and reward aspects of the investment.

Taxability of Overnight Funds

The best overnight funds are more tax-efficient than many other investment options. Overnight fund returns may attract two types of taxes – Short-Term Capital Gains (STCG) tax and Long-Term Capital Gains (LTCG) tax. Since these funds are classified as ‘Debt Funds,’ the STCG applies on withdrawals made before three years while the LTCG applies on withdrawals made after three years. View More

Regarding STCG, any profits made by the investor are taxed according to the investor’s tax slab. So, if your income falls in the 30% tax bracket, you will need to pay 30% tax on the profits from overnight funds. However, LTCG is taxed at a flat rate of 20% after indexation. Indexation refers to adjusting the returns against inflation during the period. Also, if you receive any dividend from the scheme, it will be taxed as per your existing tax slab.

Hence, before investing, consider the returns’ taxability to maximise profits.

Risks Involved With Overnight Funds

Overnight funds are mostly known for their benefits, as the holding period is generally no more than a day. But, despite such fascinating benefits, there are also some downsides of investing in overnight funds: View More

Sensitivity to Interest Rate – Although not commonly seen, overnight funds are quite sensitive to interest rates. For instance, if you invest at 10 AM today and the RBI decides to reduce the rates at 3 PM, your scheme returns may decrease considerably. Conversely, if the RBI decides to increase the rates, you may benefit from the sudden jump in the fund value.
Returns are Not Too High – Overnight funds are not good instruments for long-term investment. They typically provide a little higher returns than bank savings or current accounts. So, liquid funds will be a good choice if you want to earn higher returns and invest in a fund closely resembling overnight funds.
Credit Risks Cannot Be Ruled Out – While this scenario is highly unlikely and has never happened before, all debt funds are subject to credit risks. If the issuer of the underlying asset defaults on the payment on instrument maturity, the investor may lose a part of their investment.
Lack of Control – Overnight funds are generally managed by fund managers who oversee the portfolio selection process. Hence, although you are an investor, you cannot influence the debt instrument selection in any way.

Advantages of Overnight Mutual Funds

The following are the top benefits of investing in overnight funds: View More

Safe Returns – Since the investment term of overnight funds is much lesser than conventional mutual funds, the risks of capital loss are minimal.
Idle Fund Utilisation – While the minimum term of a bank fixed deposit is seven (7) days, overnight funds mature after one day. Hence, investors with huge capital prefer investing in these funds to grow their capital before needing the money.
Less Volatility – Traditional debt funds are more exposed to credit or interest rate risks than overnight funds. Since an overnight fund’s portfolio changes every day, it safeguards investors from a sudden jump or fall in interest rates and also credit and liquidity risks.
100% Liquid – Mutual fund houses do not levy any entry or exit load on overnight funds. Hence, the investment cost of overnight funds is zero. Moreover, you can withdraw your money any time you want.

Popular Overnight Mutual Funds

  • Fund Name
  • Min SIP Investment Amt
  • AUM (Cr.)
  • 3Y Return

SBI Overnight Fund – Direct Growth is an Overnight scheme that was launched on 03-01-13 and is currently under the management of our experienced fund manager R Arun. With an impressive AUM of ₹16,872 Crores, this scheme's latest NAV is ₹3811.7277 as of 01-12-23.

SBI Overnight Fund – Direct Growth scheme has delivered a return performance of 6.6% in the last 1 year, 4.7% in the last 3 years, and an 6.2% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Overnight funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹16,872
  • 3Y Return
  • 6.6%

HDFC Overnight Fund – Direct Growth is an Overnight scheme that was launched on 31-12-12 and is currently under the management of our experienced fund manager Anil Bamboli. With an impressive AUM of ₹10,066 Crores, this scheme's latest NAV is ₹3476.5257 as of 01-12-23.

HDFC Overnight Fund – Direct Growth scheme has delivered a return performance of 6.5% in the last 1 year, 4.7% in the last 3 years, and an 6% since its launch. With a minimum SIP investment of just ₹100, this scheme offers a great investment opportunity for those looking to invest in Overnight funds.

  • Min SIP Investment Amt
  • ₹100
  • AUM (Cr.)
  • ₹10,066
  • 3Y Return
  • 6.5%

AXIS Overnight Fund – Direct Growth is an Overnight scheme that was launched on 15-03-19 and is currently under the management of our experienced fund manager Aditya Pagaria. With an impressive AUM of ₹11,340 Crores, this scheme's latest NAV is ₹1238.9234 as of 01-12-23.

AXIS Overnight Fund – Direct Growth scheme has delivered a return performance of 6.6% in the last 1 year, 4.7% in the last 3 years, and an 4.6% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in Overnight funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹11,340
  • 3Y Return
  • 6.6%

PGIM India Overnight Fund – Direct Growth is an Overnight scheme that was launched on 27-08-19 and is currently under the management of our experienced fund manager Puneet Pal. With an impressive AUM of ₹65 Crores, this scheme's latest NAV is ₹1208.8099 as of 01-12-23.

PGIM India Overnight Fund – Direct Growth scheme has delivered a return performance of 6.6% in the last 1 year, 4.7% in the last 3 years, and an 4.5% since its launch. With a minimum SIP investment of just ₹100, this scheme offers a great investment opportunity for those looking to invest in Overnight funds.

  • Min SIP Investment Amt
  • ₹100
  • AUM (Cr.)
  • ₹65
  • 3Y Return
  • 6.6%

Sundaram Overnight Fund – Direct Growth is an Overnight scheme that was launched on 20-03-19 and is currently under the management of our experienced fund manager Sandeep Agarwal. With an impressive AUM of ₹1,173 Crores, this scheme's latest NAV is ₹1244.5973 as of 01-12-23.

Sundaram Overnight Fund – Direct Growth scheme has delivered a return performance of 6.6% in the last 1 year, 4.7% in the last 3 years, and an 4.8% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Overnight funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹1,173
  • 3Y Return
  • 6.6%

Franklin India Overnight Fund – Direct Growth is an Overnight scheme that was launched on 08-05-19 and is currently under the management of our experienced fund manager Pallab Roy. With an impressive AUM of ₹274 Crores, this scheme's latest NAV is ₹1222.1381 as of 01-12-23.

Franklin India Overnight Fund – Direct Growth scheme has delivered a return performance of 6.5% in the last 1 year, 4.6% in the last 3 years, and an 4.5% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Overnight funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹274
  • 3Y Return
  • 6.5%

UTI-Overnight Fund – Direct Growth is an Overnight scheme that was launched on 14-01-13 and is currently under the management of our experienced fund manager Amit Sharma. With an impressive AUM of ₹6,251 Crores, this scheme's latest NAV is ₹3206.108 as of 01-12-23.

UTI-Overnight Fund – Direct Growth scheme has delivered a return performance of 6.6% in the last 1 year, 4.7% in the last 3 years, and an 6.2% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in Overnight funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹6,251
  • 3Y Return
  • 6.6%

Aditya Birla SL Overnight Fund – Dir Growth is an Overnight scheme that was launched on 01-11-18 and is currently under the management of our experienced fund manager Kaustubh Gupta. With an impressive AUM of ₹8,210 Crores, this scheme's latest NAV is ₹1266.8718 as of 01-12-23.

Aditya Birla SL Overnight Fund – Dir Growth scheme has delivered a return performance of 6.6% in the last 1 year, 4.7% in the last 3 years, and an 4.8% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in Overnight funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹8,210
  • 3Y Return
  • 6.6%

Canara Robeco Overnight Fund – Direct Growth is an Overnight scheme that was launched on 24-07-19 and is currently under the management of our experienced fund manager Suman Prasad. With an impressive AUM of ₹180 Crores, this scheme's latest NAV is ₹1211.6229 as of 01-12-23.

Canara Robeco Overnight Fund – Direct Growth scheme has delivered a return performance of 6.5% in the last 1 year, 4.7% in the last 3 years, and an 4.5% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Overnight funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹180
  • 3Y Return
  • 6.5%

Edelweiss Overnight Fund – Direct Growth is an Overnight scheme that was launched on 24-07-19 and is currently under the management of our experienced fund manager Rahul Dedhia. With an impressive AUM of ₹396 Crores, this scheme's latest NAV is ₹1213.2399 as of 01-12-23.

Edelweiss Overnight Fund – Direct Growth scheme has delivered a return performance of 6.5% in the last 1 year, 4.6% in the last 3 years, and an 4.5% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Overnight funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹396
  • 3Y Return
  • 6.5%

Frequently Asked Questions

Are the returns on Overnight Funds taxable? 

Yes, the returns on overnight funds are taxable. However, they are more tax efficient as compared to other investment options. The tax rates depend on the period for which you hold the funds. If you hold the funds for less than three years, you must pay a Short-Term Capital Gains Tax on the returns. The Short-Term Capital Gains Tax rate will be decided based on the income slab of the investor.

However, if you hold the fund for more than three years, you will have to pay a Long-Term Capital Gains Tax at a flat rate of 20%.

What are some benefits of investing in Overnight Mutual Benefits?

There are several benefits of investing in overnight funds. The overnight funds are held for a shorter period. Hence, they are secure, and you do not lose a lot of capital in case of interest fluctuations. Also, if you have a lot of idle funds and want to earn some returns on them, you can invest them in an overnight fund.

Who Are These Funds Suited For? 

Overnight funds are debt funds that get their returns from debt securities. These funds have an overnight maturity. These open-ended funds have a residual maturity of day. The fund is quite flexible and is a liquid form of different debts. If you are interested in investing in overnight funds, you need to place a request for the purchase and the redemption of the funds during regular business hours. 

These funds are ideal for risk-averse investors looking for short-term investments and short-term gains. If you want a weekly investment option, you can invest in short-term funds like overnight funds. You can even hold these securities for a day. These funds are ideal for investors who want flexibility with their investments. 

Are Overnight Funds dependent on interest rate changes?

Any interest changes will impact the overnight funds directly. For instance, if you make the investment at 1 AM today and the RBI reduces the interest rate at 4 PM on the same day, the returns on the overnight fund will decrease substantially. However, your returns will increase considerably if the RBI increases the interest rate within the same day.

What are the top overnight mutual funds in 2022? 

Several overnight mutual funds are performing well. Some of the best-performing overnight mutual funds of the year are UTI Overnight Fund, SBI Overnight Fund, and HDFC Overnight Fund.

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