Top Overnight Funds to Invest Online in 2024
Just like how you can’t predict when you’ll stumble upon some extra cash, overnight funds are a type of mutual fund where you can park your money for a short period, usually overnight (hence the name), to earn a little extra while you figure out what to do with it. In a nutshell, overnight funds are like the parking lot of the investment world. You can drive in, stay for a short while, and then zoom off to your next destination when the time is right. Let’s understand overnight mutual funds better.
What are Overnight Funds?
Overnight fund meaning is a type of open-ended debt fund that invests in assets or securities with a maturity of one day. These funds are considered the safest within the mutual fund category due to their low-risk profile, offering safety, liquidity, and withdrawal flexibility. They invest in overnight assets like reverse repo and debt instruments with one-day maturity, earning through interest payments rather than capital gains. The primary purpose of overnight funds is to provide investors with a safe avenue to park surplus funds for a brief period, making them ideal for those seeking safety and liquidity over high returns.
List of Best Overnight Funds in India
To find the best Overnight Mutual Fund, investors should consider factors such as returns and expense ratios. Since these funds invest in securities that mature overnight, their performance should be measured weekly or monthly. However, let’s have a look at the best overnight mutual fund that may offer good overnight mutual fund returns in India 2024.
| Name of the Fund | Market Cap (in Cr) | Returns |
|---|---|---|
| DSP Overnight Fund | ₹2,902 | +5.14% |
| Nippon India Overnight Fund | ₹5,745 | +5.14% |
| Aditya Birla Sun Life Overnight Fund | ₹6,474 | +5.12% |
| UTI Overnight Fund | ₹5,570 | +5.12% |
| Kotak Overnight Fund | ₹7,189 | +5.12% |
| Bandhan Overnight Fund | ₹1,834 | +5.11% |
| ICICI Prudential Overnight Fund | ₹11,582 | +5.10% |
| SBI Overnight Fund | ₹14,903 | +5.09% |
| HDFC Overnight Fund | ₹9,602 | +5.07% |
| Axis Overnight Fund | ₹10,499 | NA |
Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
Note: The data is from 28th March, 2024. However, for real-time updates on overnight mutual funds prices and market trends, visit smallcase stocks collection today!
Brief Overview of the Top 10 Overnight Mutual Funds in 2024
Let’s have a look at the best performing overnight funds in India 2024.
DSP Overnight Fund Direct – Growth
The DSP Overnight Fund Direct-Growth is a mutual fund scheme offered by DSP Mutual Fund that specialises in overnight investments. This fund has a tenure of 5 years and 2 months, having commenced on 16th December, 1996. With a predominantly low credit profile, the fund prefers lending to borrowers with poor credit quality. Thus, this strategy is typical among funds in this category, thereby maintaining a comparable risk profile regarding potential defaults. The fund’s top holdings comprise investments in the Reserve Bank of India.
Nippon India Overnight Fund
Nippon India Overnight Fund Direct—Growth is an Overnight mutual fund scheme from Nippon India Mutual Fund. The fund’s expense ratio is 0.08%, which is close to the fees charged by most other Overnight funds. The Nippon India Overnight Fund Direct – Growth has provided returns of 6.82% over the past year. Since its inception, it has maintained an average annual return of 4.85%. The fund’s credit profile indicates a low-risk approach, suggesting investments in borrowers with lower credit quality. This strategy is common among funds in this category, implying a similar default risk across the board. The fund’s primary holdings are in the Reserve Bank of India.
Aditya Birla Sun Life Overnight Fund
The Debt Mutual Fund Scheme, Aditya Birla Sun Life Overnight Fund Direct Growth, was introduced by Aditya Birla Sun Life Mutual Fund and became accessible to investors on December 23, 1994. The fund is currently managed by Kaustubh Gupta. As of 11th March, 2024, the fund boasts an Asset Under Management (AUM) of ₹3,29,326 Cr, with the latest Net Asset Value (NAV) standing at ₹1,290.06. It is categorised as carrying a Low to Moderate risk rating. The minimum lump sum investment required for this scheme is ₹500.
UTI Overnight Fund Direct Growth
The Debt Mutual Fund Scheme, UTI Overnight Fund Direct Growth, was introduced by UTI Mutual Fund and became accessible to investors on 14th November, 2002. Amandeep Chopra currently manages the fund. As of 11th March, 2024, the fund has an Asset Under Management (AUM) of ₹2,86,922 Crore, with a Latest NAV of ₹3,265.42. It holds a low-risk rating. The fund has an expense ratio of 0.05%, close to what most other Overnight funds charge. The scheme allows for a Minimum SIP Investment of ₹500 and a Minimum Lumpsum Investment of ₹500.
Kotak Overnight Fund
The Kotak Overnight Fund Direct Growth, introduced by Kotak Mahindra Mutual Fund, is a Debt Mutual Fund Scheme. It was launched for investors on 5th August, 1994. Currently, Deepak Agrawal serves as the Fund Manager for the Kotak Overnight Fund Direct Growth fund. The fund currently holds assets under management (AUM) totaling ₹3,73,358 Crores, with the latest Net Asset Value (NAV) recorded as ₹1,272.58 as of 11th March, 2024. The Kotak Overnight Fund Direct Growth is classified as a low-risk investment option. The minimum lump sum investment required for this fund is ₹100.
Bandhan Overnight Fund
The Bandhan Overnight Fund Direct Growth is a Debt Mutual Fund Scheme launched by Bandhan Mutual Fund. It became accessible to investors on 20th December, 1999. Brijesh Shah is the Fund Manager for the Bandhan Overnight Fund Direct Growth. As of 11th March, 2024, the fund has an Asset Under Management (AUM) of ₹1,34,084 Cr, with the latest NAV standing at ₹1,272.31. This fund is rated as Low risk and has an expense ratio of 0.05%. The minimum SIP investment is set at ₹100, while the minimum lumpsum investment required is ₹1,000.
ICICI Prudential Overnight Fund
ICICI Prudential Overnight Fund Direct – Growth is a Overnight mutual fund scheme from ICICI Prudential Mutual Fund. This scheme was made available to investors on 12th October, 1993. Rahul Goswami, Rohan Maru, Nikhil Kabra is the Current Fund Manager of ICICI Prudential Overnight Fund Direct Growth fund. The fund currently has an Asset Under Management(AUM) of ₹6,71,910 Cr and the Latest NAV as of 11th March, 2024 is ₹1,285.82. The ICICI Prudential Overnight Fund Direct Growth is rated Low risk. Minimum SIP Investment is set to ₹500. Minimum Lumpsum Investment is ₹100.
SBI Overnight Fund
SBI Overnight Fund Direct-Growth, offered by SBI Mutual Fund, is an overnight mutual fund scheme that became available to investors on 29th June, 1987. The fund is currently managed by R. Arun. With an Asset Under Management (AUM) of ₹9,00,277 Crores, and a Latest NAV of ₹3,881.64 as of 11th March, 2024, the scheme is categorised as low risk. The minimum SIP Investment stands at ₹2,000, while the minimum Lumpsum Investment is ₹5,000. However, its ability to mitigate losses in a declining market is considered below average. Furthermore, the fund’s credit profile is rated very low, suggesting poor-quality lending to borrowers.
HDFC Overnight Fund
The HDFC Overnight Fund Direct Plan-Growth, offered by HDFC Mutual Fund, is an overnight mutual fund scheme. It was introduced to investors on 10th December, 1999. Anil Bamboli is the Fund Manager for the HDFC Overnight Fund Direct Plan Growth fund. Presently, the fund boasts an Asset Under Management (AUM) of ₹6,07,083 Crore, with the latest Net Asset Value (NAV) recorded as ₹3,540.30 as of 11th March, 2024. This fund is classified as having a low-risk rating. The Minimum Systematic Investment Plan (SIP) Investment stands at ₹100, while the minimum lump sum investment required is ₹100. Given that most funds in this category extend loans to similar borrowers, the risk of default in this fund aligns with that of the category.
Axis Overnight Fund
The Axis Overnight Fund Direct Growth is a Debt Mutual Fund Scheme introduced by Axis Mutual Fund. Launched on 4th September, 2009, this scheme is managed by Aditya Pagaria. The fund boasts an Asset Under Management (AUM) of ₹2,69,711 Cr, with the latest NAV recorded at ₹1,261.69 as of 11th March, 2024. Rated as Low risk, the Axis Overnight Fund Direct Growth offers a minimum SIP Investment of ₹1,000 and a minimum Lumpsum Investment of ₹500. With an expense ratio of 0.05%, it closely aligns with the charges levied by most other Overnight funds.
Purpose of an Overnight Mutual Fund
Overnight funds serve the purpose of optimising investors’ cash reserves for profitability. The following characteristics of these funds enhance their feasibility:
- Brief Investment Horizon: Overnight Mutual Funds reach maturity within a single day, enabling investors to maximise the utility of surplus cash quickly.
- Low Risk: With their short investment horizon and immediate maturity, these funds maintain minimal exposure to risk.
- High Liquidity: These funds are recognized as highly liquid investment instruments, facilitating prompt and efficient access to funds when needed.
Features of Overnight Funds
Here is a list of features of overnight funds.
- 1-Day Maturity: Overnight funds are debt instruments with a maturity of just one day. Investors often transfer their money from a regular account to overnight funds to earn interest.
- Risk-Free: Since overnight funds invest in debt instruments like debt securities and Reverse Repos, capital losses are minimal.
- Benefit from Interest Rate Fluctuations: Returns from overnight funds are directly proportional to interest rates. When rates fall, the value of these funds decreases, but they earn more when rates rise.
How Do Overnight Funds Work?
Overnight funds operate by investing in diverse debt securities, each maturing within a day, ensuring a continuous cycle of securities maturing and being reinvested daily. Fund managers replace maturing securities with new ones daily, maintaining a consistent turnover and incremental growth in Assets Under Management (AUM) through interest payments.
Factors To Consider Before Investing in the Best Overnight Fund
Overnight funds may represent the safest category within the realm of debt funds. However, before making any investment decisions, investors should be mindful of several key aspects regarding these funds.
- First, it’s important to understand that overnight funds may prioritise safety over maximising returns. Comparable to a savings account, these funds can offer a secure investment avenue with easy accessibility. Consequently, the returns associated with overnight funds typically remain on the lower end of the spectrum. Nevertheless, various funds’ returns and expense ratios diverge significantly. Consequently, investors are advised to conduct thorough market analyses to identify funds that demonstrate consistent performance coupled with low costs.
- Secondly, investors opting for overnight funds must acknowledge the trade-off between returns, safety, and liquidity. Consequently, any investment in such funds should align with your financial objectives and strategy rather than reacting solely to recent credit-related events. For instance, while allocating a portion of funds to overnight investments is prudent, completely transitioning to overnight funds solely for risk avoidance may not be optimal. For investors with a low risk tolerance but a longer investment horizon (e.g., 3-6 months), greater returns can be achieved by considering overnight liquid funds or ultra-short duration funds that primarily hold high-quality bonds.
Who Can Invest in an Overnight Mutual Fund?
- Investors Seeking Short-Term Investment Options: Overnight funds can present an optimal choice for individuals with a brief investment horizon. These funds cater to those aiming for an investment duration of one week or less, enabling investors to redeem their units after merely one day of holding. This aspect of flexibility is a significant advantage of overnight funds over liquid funds, which may now impose an exit load for redemptions within seven days.
- Transitioning from Conservative to Equity Investments: Those seeking a cautious approach before entering equity markets may find overnight funds beneficial. By initially parking their funds in overnight funds, investors can gradually utilise a systematic transfer plan (STP) to transition their investments into equity funds. This strategy allows for a phased entry into equity investments while safeguarding the invested corpus within the secure environment of overnight funds.
How to Invest in Overnight Funds?
Investing in overnight funds involves a few straightforward steps:
- Open an Investment Account: You’ll need a demat account to invest in mutual funds, such as overnight funds. Most brokers and financial institutions offer demat accounts.
- Choose an Overnight Fund: Research and pick a suitable overnight fund based on your investment goals and priorities. Consider factors like expense ratio and past performance (though remember that past performance doesn’t guarantee future results).
- Invest: Once you’ve chosen a fund, you can invest through your broker’s platform or the fund house’s website. Overnight funds typically allow for lump sum investments and Systematic Investment Plans (SIPs).
Here are some additional points to keep in mind:
- Investment Horizon: Overnight funds are ideal for short-term parking of your money, typically a week or less. They offer high liquidity and you can redeem your investment anytime.
- Returns: Overnight funds offer returns generally higher than savings accounts but lower than other debt or equity funds.
- Taxation: Dividends from overnight funds are taxed as per your income tax slab.
Before investing, ensure you understand your risk tolerance and investment goals. Overnight funds are considered low-risk but are not entirely risk-free. It’s advisable to consult a financial advisor for personalised investment advice.
Taxation on Overnight Funds
Investors in overnight funds taxation typically receive income in the form of dividends and capital gains. Dividend income is exempt from taxation in the hands of investors. On the other hand, capital gains represent the profit gained from the difference between the purchase and selling prices of units. The tax rate applicable to capital gains hinges on the duration for which the investor holds the units of the overnight fund:
- Short-term Capital Gains Tax: The tax is calculated at the applicable income tax slab rate for STCG (investments held for up to 3 years).
- Long-term Capital Gains Tax: For LTCG (units held for more than 3 years), one can benefit from indexation. This involves adjusting the purchase price to account for inflation using a government-provided index, thereby reducing the taxable amount. Long-term capital gains are currently subject to a lower tax rate of 20%.
Benefits of Overnight Mutual Fund
Debt funds may offer numerous advantages, particularly to retail investors or those accustomed to maintaining their funds in bank deposits.
However, the safest option within debt funds is represented by overnight funds. Thus, overnight fund interest rates present zero interest rate risk and minimal credit risk. Let’s explore this further.
- Eliminate the Possibility of Losses: Due to their exclusive investment in overnight securities, overnight funds may eliminate the possibility of capital gains or losses. Consequently, the fund’s value remains stable, gradually increasing through interest income. Moreover, the near-absence of credit risk is notable, as securities maturing in a single day are highly unlikely to default on interest payments. To summarise, when compared to liquid funds, which closely resemble them in terms of risk-return dynamics, overnight mutual funds offer relatively higher safety.
- Cost Effective: Over night funds are characterised by their cost-effectiveness, primarily because their debt holdings do not require active management. In practice, most overnight funds maintain expense ratios below 1%.
- Flexible Holding Period: One may benefit from overnight funds with a flexible holding period, enabling them to retain their investments for as long as needed. Entry and exit from the investment are straightforward, allowing you to earn secure, market-linked returns throughout the investment duration.
- Efficient Use of Surplus Funds: These funds offer a lucrative investment avenue for individuals seeking to earn higher returns on their excess cash while minimising risk. Unlike many long-term bank deposits or fixed deposits, overnight mutual funds enable investors to earn profits over shorter durations, sometimes just a matter of days.
Disadvantages of Overnight Funds
While Overnight Funds provide stability and easy access to funds, they also come with drawbacks. Here are some disadvantages:
- Low Returns: Compared to other mutual funds, over night funds may offer modest returns.
- Tax Implications: Gains from Overnight Funds are taxed based on the individual’s income tax rate, potentially reducing returns.
- Inflation Risk: With relatively low returns, there’s a risk that the purchasing power of invested capital may not keep pace with inflation.
To Wrap It Up…
Overnight Funds provide investors with a safe and flexible investment option with the potential to earn higher returns than traditional savings accounts. By understanding the factors that affect these funds and how to find the best options, investors can make informed decisions about their investments. However, it’s important to do your own research and/or consult a financial advisor before investing in the best agriculture stocks in India.
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Frequently Asked Questions(FAQs) on Overnight Funds
The top 5 over night funds in India 2024 are as follows:
(a) DSP Overnight Fund Direct-Growth
(b) Nippon India Overnight Fund
(c) Aditya Birla Sun Life Overnight Fund
(d) UTI Overnight Fund Direct-Growth
(e) Kotak Overnight Fund
Note: This information is provided for educational purposes and is not intended as a recommendation or endorsement.
Over the past year, Overnight Funds have yielded an average annual return of 6.79%. Looking at their performance over the last three and five years, the overnight fund returns annually stand at 5.1% and 4.74%, respectively.
Apart from the listed top 10 overnight funds, investors need to choose a fund that matches their goals and timeline for investing because everyone’s needs are different.
The minimum investment amount to invest in the best overnight mutual funds is Rs. 1000.
