According to reports from Mint, Bank of India Overnight Fund emerged as the best-performing scheme in the overnight fund category with a 1-year return of 5.59%, followed by Franklin India Overnight Fund at 5.40% and Bajaj Finserv Overnight Fund at 5.39%. The top five performers also included Tata Overnight Fund at 5.38% and Axis Overnight Fund at 5.37%. These funds are designed to invest exclusively in securities that mature within one business day, making them among the lowest-risk mutual fund categories available to investors.
As reported by Mint, Bank of India Overnight Fund generated 1.44% returns in the last three months and 2.75% over the past six months, demonstrating consistent performance across shorter timeframes. Franklin India Overnight Fund delivered 1.29% returns over the last three months and 2.59% over six months, while Bajaj Finserv Overnight Fund achieved 1.29% in three months and 2.59% over six months. These funds typically invest in instruments such as TREPS (Tri-Party Repo), reverse repos, treasury bills and other overnight money market securities, with portfolios refreshed daily to maintain extremely short maturity profiles.
According to Mint, overnight funds are debt mutual funds that invest only in overnight securities that mature within one business day, as per the Securities and Exchange Board of India (SEBI). The funds carry the lowest risk among mutual fund categories, making them suitable for investors prioritizing safety and liquidity in the short term. Since these investments mature the next working day, the portfolio is refreshed daily, allowing the fund to maintain an extremely short maturity profile while keeping credit risk relatively low through high-quality collateral backing.
As reported by Mint, overnight funds offer investors an alternative to leaving surplus cash idle in savings bank accounts while earning modest returns, even for short-term investments. These funds are well-suited for emergency corpus management as they provide high liquidity while allowing money to generate returns until needed. However, overnight fund returns are not fixed, and these funds are not entirely risk-free, as yields can change with movements in short-term interest rates and RBI policy decisions. The funds are suitable for investors who want to temporarily park surplus money without taking significant interest-rate risk.
