Mutual funds can be classified into 2 broad categories – equity-oriented and debt-oriented. Overnight funds fall in the second category. These are a category of debt fund that invests in very secure instruments that have a maturity period of only one day – hence the name overnight funds. The manager in charge of an overnight fund buys such ultra short-term debt instruments every day and they mature the next day.
According to AMFI (Association of Mutual Funds in India) data, an amount of Rs 525,369.60 crore was mobilised in overnight funds in September. The net AUM (assets under management) on September 30, 2024 stood at Rs 67,274.69 crore. The average net AUM for September stood at Rs 1,01,290.97 crore.
Overnight funds
Overnight funds are suitable for those who eye regular income via debt and money market investments. They are essentially conservative investors who have a limited investment horizon, which is typically one week or even less. Experts say the time duration can even be one day.
“Those who want to avoid risks until they place their investment into equity funds can also park funds in an overnight fund. The money parked in overnight funds can be transferred via STP (Systematic Transfer Plan) into an equity fund,” said investment strategist Nilanjan Dey.
Some of the popular funds in this category are Axis Overnight Fund, HSBC Overnight Fund, Tata Overnight Fund, Nippon Overnight Fund, Aditya Birla Sunlife Overnight Fund, Kotak Overnight Fund, Bandhan Overnight Fund, UTI Overnight Fund etc.
However, one direct corollary of low risk is low return. According to reports, the returns of overnight funds over 3 years hover in the region of 5.8%-5.9%. But they are completely liquid, have very little volatility and offer the safety of capital. One should remember that the taxation rules applicable to overnight mutual funds are the same as those applicable to debt funds. Investors earn capital gains and dividend income from overnight funds.
There are as many as 35 overnight funds in the Indian market and at the end of September 2024 there were 8,59,383 folios in this segment. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
