List of Top Overnight Funds in India (2025): Meaning, Taxation, Benefits, Risks
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.
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 look at the top overnight funds based on their 5-yr CAGR today:
| Name of the Fund | Market Cap (Rs. in cr.) | Expense Ratio (%) | CAGR 5Y (%) |
|---|---|---|---|
| Mirae Asset Overnight Fund | 1,743.29 | 0.08 | 4.99 |
| PGIM India Overnight Fund | 58.93 | 0.1 | 4.97 |
| DSP Overnight Fund | 2,333.79 | 0.06 | 4.97 |
| HSBC Overnight Fund | 2,275.81 | 0.06 | 4.97 |
| Axis Overnight Fund | 8,404.40 | 0.05 | 4.96 |
| Nippon India Overnight Fund | 6,921.68 | 0.08 | 4.95 |
| Baroda BNP Paribas Overnight Fund | 653.48 | 0.09 | 4.95 |
| Mahindra Manulife Overnight Fund | 300.68 | 0.09 | 4.94 |
| LIC MF Overnight Fund | 821.40 | 0.07 | 4.94 |
| Tata Overnight Fund | 4,126.58 | 0.06 | 4.94 |
Disclaimer: Please note that the above table is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Stock Screener and is subject to real-time updates.
Note: The data on the list of the best overnight mutual funds is from 30th December 2024. This data is derived from the Tickertape Mutual Funds Screener.
- Plan: Growth
- Category: Debt > Overnight Fund
- 5Y CAGR: Sorted from Highest to Lowest
🚀 Pro Tip: You can use Tickertape’s Mutual Fund Screener to research and evaluate funds with over 50+ pre-loaded filters and parameters.
Brief Overview of the Top 10 Overnight Mutual Funds
Axis Overnight Fund
Axis Overnight Fund invests in high-quality overnight securities with a 1-day maturity. This low-risk debt fund delivers stable returns and high liquidity. It suits investors who want to park money for the short term with minimal risk.
Aditya Birla SL Overnight Fund
Aditya Birla SL Overnight Fund invests in overnight money market instruments. It offers a safe, low-risk option for short-term investments. With strong liquidity, it suits conservative investors who want competitive returns on surplus funds with minimal volatility.
Kotak Overnight Fund
Kotak Overnight Fund invests in overnight securities and money market instruments. It offers low-risk, stable returns and caters to short-term investors who want liquidity and safety while earning better returns than savings accounts or fixed deposits.
ICICI Pru Overnight Fund
ICICI Pru Overnight Fund invests in overnight debt instruments and ensures steady, low-risk returns. It suits investors seeking high liquidity with a short investment period and provides a reliable parking option for surplus funds.
SBI Overnight Fund
SBI Overnight Fund invests in high-quality overnight securities with a 1-day maturity. It delivers low-risk returns with strong liquidity, making it suitable for short-term investors who want safety and competitive overnight fund interest.
HDFC Overnight Fund
HDFC Overnight Fund invests in overnight securities and provides steady returns with low risk. It suits short-term investors who want high liquidity and a safe parking option for funds while earning reasonable overnight returns.
ICICI Pru Overnight Fund Direct Plan Unclaimed IDCW Transitory Scheme
ICICI Pru Overnight Fund Direct Plan Unclaimed IDCW Transitory Scheme invests in overnight debt instruments. It offers steady, predictable returns with high liquidity. It works best for conservative investors who want safety with stable returns.
ICICI Pru Overnight Fund Direct Plan Unclaimed IDCW Stable Scheme
ICICI Pru Overnight Fund Direct Plan Unclaimed IDCW Stable Scheme offers a secure, low-risk investment in overnight debt instruments. Investors get stable, predictable returns and high liquidity. It suits short-term investors who prefer conservative approaches.
ICICI Pru Overnight Fund Direct Plan Unclaimed Redemption Stable Scheme
ICICI Pru Overnight Fund Direct Plan Unclaimed Redemption Stable Scheme invests in overnight debt instruments. It provides steady returns with liquidity and works as a good option for those looking to park surplus funds for a short duration.
ICICI Pru Overnight Fund Direct Plan Unclaimed Redemption IDCW Transitory Scheme
ICICI Pru Overnight Fund Direct Plan Unclaimed Redemption IDCW Transitory Scheme invests in overnight instruments. It delivers low-risk, predictable returns with high liquidity. Investors who want a safe short-term parking option with minimal volatility find it suitable.
What are Overnight Funds?
Overnight funds are open-ended debt funds that invest in securities with a maturity of one day or less. These funds rank among the safest in the mutual fund category because they carry very low risk and provide safety, liquidity, and withdrawal flexibility. They earn returns through interest on overnight assets such as reverse repo and one-day debt instruments rather than through capital gains. Investors use these funds mainly to park surplus money safely for a short period, making them suitable for those who prefer safety and liquidity instead of high returns.
Taxation on Overnight Funds
Institutional investors, HNIs, and retail investors must account for tax on overnight funds. Authorities treat all gains as short-term capital gains regardless of the holding period, and investors pay tax on dividends according to their income tax slab.
| Tax Category | Details | Tax Rate |
| Short-Term Capital Gains (STCG) | Overnight Funds: Taxed as per income tax slab (Held < 3 years). | Taxed as per the individual’s income tax slab rate |
| Long-Term Capital Gains (LTCG) | Overnight Funds: Treated as short-term investments. | Taxed as per the individual’s income tax slab rate |
| Dividend Taxation | Overnight Funds: Dividends taxed as per income tax slab rate. | Taxed as per income tax slab rate |
| Securities Transaction Tax (STT) | Equity Mutual Funds: Tax applied when units are sold on exchange | 0.1% on the transaction value |
How to Invest in Overnight Funds?
You can easily start to invest in overnight funds by following these steps:
- To invest in the best overnight mutual funds, you can visit a mutual fund investment platform such as smallcase.
- The next step is to research and identify the overnight mutual funds that match your financial goals. Tools like the Tickertape Mutual Fund Screener can help you filter and compare funds based on parameters such as returns, expense ratio, and fund size.
- Once you shortlist the funds, visit smallcase, log in, and search for the fund by name. You can then choose the investment mode and complete the process.
Purpose of an Overnight Mutual Fund
Overnight funds help investors optimise cash reserves for profitability. These funds have some key advantages that make them feasible.
- Brief Investment Horizon Overnight Mutual Funds mature within one day. Investors can use them to deploy surplus cash quickly.
- Low Risk The short horizon and immediate maturity create minimal exposure to risk.
- High Liquidity These funds offer very high liquidity and allow investors to access money quickly when needed.
Features of Overnight Funds
- 1-Day Maturity Overnight funds are debt instruments that mature in one day. Investors transfer money from a regular account to overnight funds to earn interest. This short-term investment provides a fast and flexible option to earn returns on idle funds.
- Risk-Free Overnight funds invest in debt instruments like debt securities and reverse repos. This lowers the chance of capital loss and creates a relatively safe option for conservative investors.
- Benefit from Interest Rate Fluctuations The returns depend on changes in overnight fund interest rates. If rates fall, fund values decline. If rates rise, returns increase. This makes these funds sensitive to short-term rate movements.
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
- Risk Profile: Overnight funds are generally low-risk because they invest in short-term, high-quality debt instruments like reverse repos and treasury bills. Understanding the associated risks, including credit and liquidity risks, is important when considering these funds.
- Interest Rate Environment: Overnight fund returns are sensitive to interest rate fluctuations. When interest rates rise, overnight fund returns tend to increase. Monitoring central bank policies and market interest rates helps in understanding the potential returns from these funds.
- Liquidity Requirements: Overnight funds offer high liquidity, making them suitable for short-term investors who may need quick access to their funds. The liquidity offered by the fund is typically one of its key features.
- Expense Ratios: Although overnight funds generally have low expense ratios, comparing these ratios across different funds is important. A lower expense ratio can help ensure that more of the returns are passed on to the investor, especially given the low yield typical of these funds.
- Fund Manager Expertise: The experience of the fund manager plays a role in managing risks and returns in overnight funds. The fund’s performance can be influenced by the manager’s ability to navigate fluctuating interest rates and market conditions.
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 liquid funds’ alternative, 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.
Benefits of Overnight Mutual Fund
Short-term 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: Overnight 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
- Low Returns: Compared to other mutual funds, overnight 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…
To wrap it up, overnight funds give investors a safe and flexible investment option with the potential to earn higher returns than traditional savings accounts. When investors compare an overnight fund with a liquid fund, they should note that both options provide liquidity. Overnight funds focus on very short-term investments, while liquid funds usually involve slightly longer durations. Investors can make informed decisions when they understand the factors that affect these funds and how to find the best options. It is important to do your own research and consult a financial advisor before investing in safe overnight mutual funds to ensure the investment matches your financial goals.
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Frequently Asked Questions(FAQs) on Overnight Funds
The top 5 over night funds in India 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.
