Do overnight funds generate the 4-5% of profit in just 24 hours?

How exactly do the overnight funds work, I watched videos but didn’t understand.

  1. If it’s overnight then does that mean that I can withdraw the funds after 24 hrs along with the profit? If yes then what is the profit in this duration.

  2. If this is not the case, then how exactly does this work, if it generates a total profit of 4-5% in one year, then why do we call it overnight funds, and why would people invest in it?

  1. No
  2. Yes - The Debt funds (Part 2) – Varsity by Zerodha

4 to 5% is annual returns. If you hold it for a day, you get its daily equivalent.

[read more] (Money Markets: What They Are, How They Work, and Who Uses Them) at Investopedia

Mostly banks require these short duration funds.

@VijayNair What’s so funny? Isn’t this platform specifically made for asking questions and having discussions. Guess you are very genius. Laughing on somebody won’t help you. Get a life.

Thanks for the answer.

Thanks, will check this.

Overnight funds invest in debt papers maturing in one day, hence the name.

But the return will be higher than 4-5%. Usually, it’s closer to the SDF rate.


It is called overnight fund because they have to invest money with maturity of 1 day. I already shared definitions with you (check here.).

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Overnight comes around 5-6% ultra short term around 7% all annualised - this is with largest and most stable fund houses. Some of these funds have no exit load or an exit load if sold or STP within 7 days from the purchase date.

Right now the tax law are same with debt and FD.

People invest in overnight and liquid mostly because they are more liquid and stable although gives little lower returns. Sometimes when excess funds in the bank account (generating only 3% return in savings bank), could be transferred to an overnight or liquid for a 5% return . Sometimes it is convenient to just STP from the overnight fund to an equity etc. The taxation is applicable when doing STP.

I have been reading about equity savings funds with moderate to low risk. They are hybrid and have similar exit loads. I am not recommending anything though.

Thanks for explaining