An Overnight Fund invests only in overnight securities — instruments maturing the next business day — making it the safest, most liquid debt mutual fund category.
Overnight funds park all money in TREPS (Tri-party Repo) or overnight instruments that mature the very next day. Because the portfolio is entirely in 1-day instruments, there's virtually zero interest rate risk and zero credit risk (as no position is held longer than one day). Returns are based on the overnight repo rate (set by RBI) and typically range from 4.5%–6.5% depending on the rate cycle. NAV moves daily in tiny increments — there are no sharp negative days.
An overnight fund is the safest parking spot in the mutual fund universe. Think of it as a highly liquid, interest-earning parking lot for your cash. It lends your money overnight to banks at the RBI's repo rate, gets it back the next morning with interest, and repeats. Perfect for parking money you need in 1–3 days. Safer than liquid funds (which hold 91-day instruments) but marginally lower return.
All investments in instruments maturing the next business day.
Primary instrument: TREPS (overnight reverse repo collateralised by government securities).
NAV increases by a tiny amount daily (the overnight rate prorated).
No exit load — full liquidity always.
T+1 settlement — you get your money on the next business day after redemption.