In the ever-evolving world of mutual funds, a new category has caught the attention of smart investors: Night Mutual Funds. These are ultra-short-duration funds designed to park money overnight, offering low-risk returns with high liquidity—ideal for individuals and institutions seeking to earn something extra from idle cash without long-term commitments.

Let’s break down what Night Mutual Funds are, how they work, and why they’re gaining popularity.

What is a Night Mutual Fund?

Night Mutual Funds, also known as Overnight Mutual Funds, are open-ended debt mutual funds that invest in securities with maturity of just one day. That means the underlying instruments mature within 24 hours, making them extremely low-risk.

Investment Cycle:

• You invest today before a cut-off time (usually 1:30 PM)

• Your money is deployed in overnight instruments

• Units are allotted on the same day

• Funds can be redeemed the next working day

What Do Night Mutual Funds Invest In?

These funds typically invest in:

• Collateralized Borrowing and Lending Obligations (CBLO)

• Tri-party Repos (TREPS)

• Overnight government securities

• Since these instruments have no interest rate risk or credit risk, night funds are among the safest debt mutual fund categories available.

Returns: What Can You Expect?

While returns from Night Mutual Funds are modest, they are significantly better than a savings bank account, especially for large sums.

Returns vary based on market liquidity and RBI repo rates.

Who Should Invest in Night Mutual Funds?

Night Mutual Funds are best suited for:

• Individuals with idle money for 1–3 days

• Businesses and institutions with large temporary cash balances

• Investors wanting ultra-safe short-term parking options

• People moving money between investment instruments

Advantages of Night Mutual Funds

• Low Risk: No interest rate or credit risk

• High Liquidity: Redeem anytime with T+1 settlement

• Better than Savings Account: Higher returns for short duration

• Tax Efficiency: If held for more than 3 years, eligible for LTCG with indexation (though rare in such short holding)

Things to Keep in Mind -

• Returns are not fixed, and may vary daily

• Must invest before cut-off time (usually 1:30 PM)

• Not suitable for long-term goals

Real-Life Example

Let’s say you sold a stock today and received ₹5 lakhs in your trading account. You plan to reinvest in 2–3 days. Instead of letting it sit idle, you can park that amount in a Night Mutual Fund and potentially earn ₹200–₹300 in just one night—without taking market risk.

Final Thoughts

Night Mutual Funds are a smart, low-risk, and efficient option to park idle cash. Whether you're a retail investor or a business entity, they offer the perfect blend of safety, flexibility, and liquidity.

If you’ve been letting your money sleep in a savings account—it's time to make it work, even if it's just for one night.