Best Overnight Mutual Funds 2026

What are Overnight Mutual Funds?

Overnight funds invest exclusively in securities that mature the next business day — overnight reverse repo and similar instruments — which makes this the lowest-risk category that exists in the Indian mutual fund universe. There's essentially no meaningful interest rate risk (the entire portfolio turns over daily) and effectively no credit risk, since the underlying counterparties are typically the RBI itself via reverse repo or other government-backed instruments.

That safety comes at the cost of return: overnight fund yields track the prevailing overnight rate, which is usually the lowest yield available across the debt fund spectrum — lower than liquid funds, which take on slightly more duration (up to 91 days) in exchange for typically higher returns. Overnight funds exist specifically for money that needs to be parked with zero tolerance for capital loss, even for a single day.

In practice, retail investors use this category less often than liquid funds — the typical use case is corporates and large investors parking substantial sums for very short periods, or an investor who specifically wants to eliminate even the small residual risk a liquid fund carries, accepting a lower return in exchange.