Overnight funds: A complete investment guide

how to invest in overnight fund
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As a mode of investment, mutual funds have been around for a while. However, new sub-categories are introduced to cater to the unique investment needs of different investors. For example, the Securities and Exchange Board of India (SEBI) introduced overnight funds while undertaking major re-categorization exercise.
Overnight funds belong to the category of debt funds. But before we take you through the overnight fund investment guide, let’s first see what overnight funds are and how they work.

  • Table of contents
  1. What are overnight funds?
  2. How do overnight fund investments work?
  3. Who should invest in overnight funds?
  4. Features of overnight funds
  5. Why should you invest in Bajaj Finserv Overnight Fund?
  6. How to invest in Overnight Funds with Bajaj Finserv Mutual Fund?
  7. FAQ

What are overnight funds?

Debt funds that invest in securities that mature the next business day are known as overnight funds. These open-ended debt funds do not have a lock-in period and invest in securities like tri-party repo (TREPS), overnight reverse repos, and other money market securities with a maturity period of a single day. Investments in the scheme are generally of 1 day maturity, hence the name ‘overnight funds’.

How do overnight fund investments work?

Since overnight funds invest in debt securities and assets that mature in one business day, the fund manager uses the proceeds of one day to buy a fresh set of debt securities for the next day. When the next set of securities matures, the fund manager uses the proceeds to buy overnight securities for the very next business day. And thus, the cycle continues.
So, how does the fund earn returns? Simple – it earns through interest payments on its debt holdings or 1 day interest on securities held. Also, the portfolio of overnight funds never stays the same as the underlying securities keep maturing the next day.

Who should invest in overnight funds?

Making an overnight funds investment is suitable for you if:

  • You have a low-risk appetite and want to minimise credit risk and interest rate risk.
  • You want to invest in the short term.
  • You are a newbie and want to start investing in mutual funds.
  • You are looking for investment options that offer high liquidity.

Features of overnight funds

High liquidity: If you want to invest your idle cash for a short term before making up your mind for a bigger investment, the high liquidity associated with overnight funds can make them ideal for you.
Low risk: Since overnight funds mature the next business day, they fall in the low-risk investment category. However, the short investment horizon also affects the returns you get from overnight funds. So, they are essentially low risk, low return funds.
No exit load: Most fund houses do not charge exit load for overnight funds. However, you must always check the scheme information documents to know the details.
Resistant to market volatility: While no market investment can be completely risk-free, the short holding period of overnight funds makes them resistant to interest rate changes, credit risk, etc.
Taxation: Since overnight funds fall in the debt funds category and mature the next business day, the capital gains are added to the net income of the investor and taxed according to the applicable income tax slab rate.

Why should you invest in Bajaj Finserv Overnight Fund?

The newly launched Bajaj Finserv Overnight Fund can provide relatively reasonable returns as it invests in money market and debt instruments with overnight maturity. This fund offers a low-risk and high-liquidity investment option to investors to help them earn potentially stable returns. You can park your surplus funds in overnight funds to get potentially reasonable returns to meet your short-term investment goals. You can invest in Bajaj Finserv AMC’s Overnight Fund through online or offline channels with as little as Rs. 1,000 and in multiples of Re. 1 thereafter.

How to invest in Overnight Funds with Bajaj Finserv Mutual Fund?

You can either invest in overnight fund with the help of a distributor, or follow these steps if to invest in Bajaj Finserv Overnight Fund:
Step 1: Visit the Bajaj Finserv AMC website and navigate to ‘Overnight Fund’ in the ‘Products’ dropdown.
Step 2: Enter your PAN and sign-up with your mobile number and email.
Step 3: Enter your chosen investment amount.
Step 4: Furnish the KYC details.
Step 5: Complete the payment.

To conclude, overnight funds are a ‘low risk, low return’ investment available to all investors. The holding period of one business day allows you to test the market or build a corpus for a bigger investment depending on your investment goals. You can get started with a small amount, as less as Rs. 1000 in most cases.


What are overnight funds, and how do they work? Overnight funds are debt mutual funds that invest in ultra-short-term instruments with a maturity of one day. They offer low risk and high liquidity as they invest in securities with very short tenures.

What type of investors can opt for overnight funds? Investors with surplus funds looking for a relatively stable and liquid investment option with nominal interest rate risk can consider overnight funds. These funds are particularly suitable for short-term parking of funds.

Are the returns from overnight funds guaranteed? No, the returns from overnight funds are not guaranteed. While they are considered low-risk due to their short-term nature and investments in highly liquid instruments, the returns fluctuate based on prevailing market conditions and interest rates.

What are the advantages of overnight funds?Overnight funds are relatively stable debt fund that seek to offer consistent returns. Additionally, investors can enter and exit this scheme easily, receiving market-linked returns for the term of their investment.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views / opinions or as an investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.