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Overnight funds, as categorised by SEBI are open-ended schemes that invest in securities that have a maturity period of just 1 day. Being highly liquid in nature, these funds allow investors to pool in their funds and achieve their investment goals at minimum risk.

  • Since these funds have a lower maturity period, they offer lower returns
  • These funds can be used as emergency funds and deployed for purposes such as medical emergencies, etc.
  • The fund managers of these funds buy securities on a daily basis, which mature in a day and are further gathered to buy new securities
  • These funds are considered safest amongst all debt mutual fund options because of their low investment horizon
  • Overnight funds also act as alternatives to Bank deposits or FDs for investors looking for safe, short-term investment options

To learn more about what Overnight funds are, Click here

Top 5 Overnight Funds to Invest in 2021

FundAUM (Crores)1-Day Returns 

(in %)

1-Week

Returns 

(in %)

1-Month Returns (in%)
HDFC Overnight Fund18,0870.010.050.26
SBI Overnight Fund13,5290.010.050.25
UTI Overnight Fund4,2540.010.050.26
Sundaram Overnight Direct Fund7250.010.060.26
Edelweiss Overnight Direct Fund9130.010.060.28

(Data as on 19 May 2020; Source: Value Research)

1. HDFC Overnight Fund

1-Day Returns (in %)1-Week Returns (in %)1-Month Returns (in%)
HDFC Overnight Fund0.010.050.26
CCIL T Bill Liquidity Weight0.010.060.26

Data as on 19 May 2020, Source: Value Research

  • The fund aims to generate returns by investing in debt and money market instruments with overnight maturity
  • Like other overnight funds, HDFC overnight fund involves negligible risk of loss, but also, does not guarantee returns or safety of capital
  • The fund has generated returns of 4.77% in the last 1 year as against its benchmark returns of 4.21%

2. SBI Overnight Fund

1-Day Returns 

(in %)

1-Week Returns 

(in %)

1-Month Returns (in%)
SBI Overnight Fund0.010.050.25
CCIL T Bill Liquidity Weight0.010.060.26

Data as on 19 May 2020, Source: Value Research

  • SBI overnight fund intends to provide the investors with an opportunity to invest in overnight securities that are maturing on the very next day
  • The fund managers plan to invest in overnight securities in order to generate returns corresponding to the overnight rates in the money market
  • The fund has generated a return of 4.81% over the last 1 year against the benchmark returns of 4.21%

3. UTI Overnight Fund

1-Day Returns 

(in %)

1-Week Returns 

(in %)

1-Month Returns (in%)
UTI Overnight Fund0.010.050.26
CCIL T Bill Liquidity Weight0.010.060.26

Data as on 19 May 2020, Source: Value Research

  • The fund has an investment objective of generating reasonable income, with low risk and high liquidity level from a portfolio of overnight securities that have a maturity period of just 1 day
  • Over the last 1 year, the fund has generated returns of 4.86% as against its benchmark which generated a return of 4.21%
  • The fund meets the investment goals of investors who wish to invest for a very short term as alternates to bank deposits or FDs

4. Sundaram Overnight Direct Fund

1-Day Returns 

(in %)

1-Week Returns 

(in %)

1-Month Returns (in%)
Sundaram Overnight Direct Fund0.010.060.26
CCIL T Bill Liquidity Weight0.010.060.26

Data as on 19 May 2020, Source: Value Research

  • The fund claims to offer very high credit quality as it mostly invests its assets in cash and cash equivalents
  • Since the fund invests in overnight securities that mature in a day’s time, it involves negligible risk and offers very high liquidity
  • The fund managers intend to generate income in line with the money market rates with making investments in debt, money market instruments, cash and cash equivalents that mature in 1 business day

5. Edelweiss Overnight Direct Fund

1-Day Returns 

(in %)

1-Week Returns 

(in %)

1-Month Returns (in%)
Edelweiss Overnight Direct Fund0.010.060.28
CCIL T Bill Liquidity Weight0.010.060.26

Data as on 19 May 2020, Source: Value Research

  • Edelweiss Overnight fund seeks to generate returns commensurate with the risk of investments in overnight instruments
  • Over the last 6 months, the fund has generated returns of 2.22% as against its benchmark return of 2.01%
  • The fund involves very low risk and meets the financial needs of debt mutual fund investors

Advantages of Investing in Overnight Funds

  • Due to the investment horizon of just one day, dynamic factors such as interest rate changes and default in securities fail to affect these funds; making overnight funds safest among all debt mutual fund options
  • These funds act as alternatives to bank deposits and/or FDs
  • Due to their very short investment horizon, these schemes are not affected by the changes in interest rates and the defaults in securities
  • These funds help investors who intend to safely park their surplus at almost no risk at all, for a very short time period, without worrying about the returns
  • These funds enable investors to put in huge amounts without much worry as even an inch of a rise in the returns could result in huge gains on the corpus

How to Invest in Overnight Funds

You can invest in overnight funds through either of the following ways-

  • Offline mode of investing– If you are not confident of your knowledge, you may choose to invest through a broker. However, investing in a fund through a broker will make you eligible for investments through regular plans that offer different returns and varied expenses in investment. If you wish to invest in the fund independently, you must visit the nearest branch of the AMC of your fund. Don’t forget to carry the following documents-
    • Identity Proof (Aadhar Card)
    • Canceled cheque
    • Passport size photos (around 4-5)
    • PAN Card
    • KYC documents (for KYC verification)
  • Online mode of investing– If you do not wish to add on to your expense of commissions or brokerage, you may visit online investment platforms such as Paisabazaar.com wherein you can choose from and compare more than 1,700 funds- all in one place, instead of following the long procedure of visiting the website of each AMC and then choosing from them. Here, you can select the fund in which you want to invest, look at the details and compare similar schemes as well as use SIP Calculator or Lumpsum Calculator to estimate the future value of your investment

Frequently Asked Questions

Ques. What are overnight funds?

Ans. Overnight funds are debt funds that invest in stocks with the maturity period of only one day.

Ques. Are overnight funds safe?

Ans. Yes, overnight funds are considered one of the safest funds to invest in because of their low investment horizon.

Ques. Is there any difference between overnight funds and liquid funds?

Ans. Yes, overnight funds and liquid funds are not the same. Both the funds differ in the allocation of assets and the risk involved. Overnight funds invest only in bonds maturing in one day while liquid funds invest in debt and money market instruments that invest in 91 days. Additionally, liquid funds involve higher risk than overnight funds.

Ques. What are the best overnight funds to invest in?

Ans. You may consider investing in the following overnight funds as of 2021-

  • HDFC Overnight Fund
  • SBI Overnight Fund
  • UTI Overnight Fund
  • Sundaram Overnight Direct Fund
  • Edelweiss Overnight Direct Fund

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