Overnight Mutual Funds

Here is All You Need To Know About Overnight Mutual Funds

The stock market has been through a lot in the past 2 to 3 years. First, the outbreak of coronavirus, and now the current scenario of invasion of Ukraine by Russia has again led to some jaw-dropping drips in the market. The continuous fluctuations in the market have raised concerns among investors and they started to park their money in overnight funds. The shortest maturity period of 1-day and high liquidity make these mutual funds the idle option for business owners and entrepreneurs to keep their money invested between payment and purchase time.

Overnight mutual funds came around in 2018 and gained the spotlight ever since liquid funds started charging exit load in case of redemption within 7 days. In 10 months from April 2019 to Jan 2020, the average assets under management (AUM) in the overnight fund category have grown five times from ₹11,567 crores to ₹52,525 crores. The number of folios under the overnight funds has also doubled to 46,763 (21,363) as of January 2020.

Want to learn in detail overnight mutual funds? Here is all you need to know –

What Are Overnight Funds?

Top 3 Things That Define Overnight Funds-Shootih

Overnight funds are the type of debt mutual funds that invest in residual maturity or securities of one day. Hence, the investors can enter and exit these funds during trading hours. As per SEBI, overnight mutual funds are open-ended debt schemes. The top 3 things that define overnight mutual funds are –

  • Liquidity
  • Safety
  • Reasonable returns

Overnight funds are used by investors to park their idle cash for weekends, holidays or a week. Since these funds can be liquidated at any time without any exit load, hence they are considered the safest of all the mutual fund’s options. The benchmark for overnight funds or entities is the Nifty 1D Rate Index.

Key Features of Overnight Mutual Funds

  • Best way to utilize the idle money
  • Portfolio of overnight mutual funds every day.
  • Old securities are changed with new ones after 24 hours.
  • Regarded as debt funds during the taxation..
  • Returns in the range of 3-5%.
  • These funds mature in one day, hence they are not exposed to high risk.  
  • No hefty penalty for having a short tenure of investment.
  • Great option at times of market crisis and uncertainty.
  • As overnight funds are highly liquid, you can redeem them at the time of emergencies.

Overnight Funds Taxation

Since overnight funds are a type of debt funds, they are also taxed in the same way. When investors invest in overnight mutual funds, they earn capital gains and dividend income. 

Now first let’s understand what are capital gains? 

Capital gains are the difference between the buying and selling price of the units. The rate at which capital gains are taxed depends on the duration for which the investor holds the mutual funds-

  • Short term capital gains – 

If you keep your money invested for a period of up to 3 years, capital gains are regarded as short-term gains and taxed according to the income tax rate to which you belong.

  • Long term capital gains-

If you sell the unit after investing it for more than 3 years, it is regarded as a long-term capital gain. In this case, the investor gets the benefit of “indexation”, because of which your taxable amount is reduced. Currently, long term capital gains are taxed at a rate of 20%.

It is also important to note here that investors are not taxed for the dividend income.

Advantages of Overnight Mutual Funds

Advantages of Overnight Funds-Shootih
  • Best scheme to invest your idle cash –

Overnight mutual funds are ideal for business owners and entrepreneurs who often have idle cash sitting in their bank accounts for weekends and holidays. For a short-term investment horizon, these funds provide much higher returns compared to other investments. By parking your idle cash in mutual funds for weekends and holidays, you can earn up to 5% interest in a year.

  • Low Risk-

Overnight funds mature in a day and hence they are not exposed to high risk. Again, one of the reasons why overnight funds are the best investment choice for business owners and risk-averse investors.

  • Easily invest and redeem-

You can easily invest and redeem overnight funds during trading hours.

  • No exit load-

Unlike FDs and other liquid funds, which charge exit loads if you withdraw them before the maturity period, overnight funds are free of exit loads. This means that you can withdraw the funds within a day. Highly convenient, isn’t it?

  • Highest liquidity-

Of all the available mutual fund schemes, overnight funds offer the highest liquidity. This is one of the biggest perks of business owners. They can redeem investments whenever they feel they need financial cushioning for the business.

Why Should MSMEs and SMEs Invest In Overnight Mutual Funds?

Overnight funds are short-term investments since this mutual fund portfolio matures in a day. 

Small business owners and entrepreneurs who generally have idle cash in their accounts for weekends and holidays can invest in overnight mutual funds to generate more profits.

Get A Free Demo Of

  • View aggregated cash flow across multiple business accounts.
  • See all the available investment options.
  • Easily invest in Mutual Funds.


    Let’s understand this by an example. Suppose you have 50 lakhs as idle sitting cash in your bank account on Friday, Shootih notifies you about it and you invest that 50 lakhs in the overnight mutual fund for a weekend, you redeem that investment on Monday and on next working day you will receive your amount with interest of Rs 1500. Pr

    This means that 50 lakhs invested for 52 weekends (in a year) and adding in holidays could help you make 1 lakh as a return in just one year. 

    This means that 50 lakhs invested for 52 weekends (in a year) and adding in holidays could help you make 1 lakh as a return in just one year. 

    Apart from bringing business owners an opportunity to gain attractive returns on their surplus cash, overnight funds also allow them to build a financial cushioning for their business.

    How to Invest in Overnight Mutual Funds?

    Shootih is the best mutual fund platform for business owners and non-individuals to invest in overnight mutual funds. Shootih is India’s first wealth management platform for small business owners and entrepreneurs that offers –

    • A 360° view of your mutual fund holdings and investing in a single click
    • Real-Time view of all your business transactions across multiple bank accounts in one place.
    • Alerts when you have idle cash and suggests the best investment opportunities.
    • Timely notifications for upcoming expenses and holidays.
    • Recommendations to help you achieve tax efficiency.

    With Shootih, businesses can create a mutual fund investment account without paying any brokerage fees or commission. Shootih makes it just a matter of clicks to invest in mutual funds. 

    Shootih alerts you whenever you have idle-sitting cash in your bank account, and its smart AI-based system suggests a relevant mutual funds scheme based on how long you can keep your idle money invested ( or based on the days left in your upcoming expenses).

    What’s more, Shootih is easy to use direct mutual fund platform which makes it a matter of a click to invest in mutual funds. Select your preferred mutual fund, depending on your objective, enter the amount, click invest and you are done.

    Get A Free Demo Of

    • View aggregated cash flow across multiple business accounts.
    • See all the available investment options.
    • Easily invest in Mutual Funds.


      Key Highlights

      • Overnight funds are debt mutual funds that invest CBLO, reverse repo and other debt assets with a maturity of one day.
      • Overnight funds are taxed similarly to debt funds
      • Overnight funds mature in 24 hours and hence they are not exposed to high risks.
      • Overnight funds are the best scheme to invest your idle cash.
      • SMEs and MSMEs can invest their surplus business cash in mutual funds for weekends and holidays and earn up to 5% of interest.
      • Shootih is the best platform for business owners and non-individuals to park their idle cash in mutual funds.

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