6 Best Overnight Mutual Funds for SIP Investments in 2026: Franklin India, Bajaj Finserv & More

Are you an Indian investor looking for ultra-safe avenues to park your short-term funds while still earning modest returns? Overnight mutual funds, especially when considered for Systematic Investment Plans (SIPs) in 2026, offer an intriguing option for liquidity and capital preservation. While the market offers several overnight funds, we’ve meticulously selected and detailed the top 5 that stand out for SIP investments in the Indian context for 2026.

Quick Comparison Table: Top Overnight Mutual Funds for SIP in 2026

Note: Expense Ratios are approximate and subject to change based on the fund’s AUM and SEBI regulations. Always check the latest Scheme Information Document (SID) for exact figures. Returns are not guaranteed and past performance may or may not be sustained in the future.

Understanding Overnight Mutual Funds and SIPs for Indian Investors

Overnight mutual funds are a category of debt funds that invest in debt and money market instruments with a maturity of one day. This means the fund manager buys securities that mature tomorrow, making them incredibly liquid and virtually free from interest rate risk. For Indian investors, these funds are an excellent alternative to keeping idle cash in a savings account, offering slightly better returns with similar liquidity.

But why consider a SIP in an overnight fund? While SIPs are traditionally associated with equity funds for long-term wealth creation, a SIP into an overnight fund can serve specific, often overlooked, financial goals:

• Building an Emergency Fund: Systematically saving a fixed amount each month into an overnight fund ensures your emergency corpus is liquid and earns a little more than a savings account.
• Parking Short-Term Surpluses: If you have monthly income that you know you’ll need in a few weeks or months for a specific expense (like a bill payment, holiday booking, or down payment), a SIP can help you accumulate it safely.
• Staggered Investment Strategy: Some investors use overnight funds as a staging ground, building up a lump sum via SIPs before transferring it to another asset class (like equity funds or real estate) when market conditions are favourable. This is often called a “Systematic Transfer Plan” (STP) from an overnight fund to an equity fund.
• Risk Aversion: For extremely conservative investors, even for short periods, a SIP in an overnight fund provides peace of mind with minimal volatility.

1. Franklin India Overnight Fund

Franklin India Overnight Fund is a well-established name in the Indian mutual fund industry, known for its disciplined approach and consistent performance in the debt segment. This fund aims to generate optimal returns while maintaining high liquidity and safety by investing in overnight instruments. It’s a preferred choice for individuals and corporate treasuries looking to park their short-term funds efficiently.

Key Features

• Invests in debt and money market instruments with a maturity of one day.
• Extremely high liquidity, allowing investors to redeem funds typically within one business day.
• Low credit risk due to investment in high-quality, short-duration instruments.
• Suitable for investors with a very short investment horizon (1 day to a few weeks).

Pros

• Strong track record and fund management expertise from Franklin Templeton.
• Consistent, low-volatility returns, making it ideal for risk-averse investors.
• No exit load, ensuring full access to your capital at any time.
• Offers better returns than a traditional savings bank account.

Cons

• Returns are modest and closely tied to prevailing short-term interest rates.
• Not suitable for long-term wealth creation goals.
• Expense ratio might be slightly higher than some direct plans of competitors.

Fees/Rate

Expense Ratio (Direct Plan, Growth): Approximately 0.10% (as of early 2024). Returns typically range from 6.5% to 7.5% per annum, depending on market conditions.

👉 Check Franklin India Overnight Fund

2. HDFC Overnight Fund

HDFC Mutual Fund is one of India’s largest and most respected asset management companies, and their Overnight Fund lives up to the reputation. It’s designed for investors who prioritize safety and liquidity above all else, offering a highly stable investment avenue for their immediate financial needs. The fund’s large Asset Under Management (AUM) often reflects investor confidence and operational efficiency.

Key Features

• Invests exclusively in overnight instruments like CBLO, reverse repos, and T-bills.
• High degree of safety with minimal exposure to interest rate fluctuations.
• Instant redemption facility available with many platforms, enhancing liquidity.
• Managed by an experienced team with a strong focus on risk management.

Pros

• Backed by the robust HDFC brand, instilling high trust among investors.
• One of the lowest expense ratios in the category, maximizing net returns.
• Excellent for parking contingency funds or funds awaiting deployment in other assets.
• High liquidity makes it perfect for emergency financial needs.

Cons

• Returns are predictable but limited, similar to other overnight funds.
• May not be suitable for investors looking for inflation-beating returns over the long term.
• While low, the expense ratio is still a deduction from returns.

Fees/Rate

Expense Ratio (Direct Plan, Growth): Approximately 0.08% (as of early 2024). Expected returns are typically in the range of 6.7% to 7.8% per annum, varying with market dynamics.

👉 Check HDFC Overnight Fund

3. Bajaj Finserv Overnight Fund

Bajaj Finserv, a prominent name in financial services, has been expanding its mutual fund offerings, and their Overnight Fund is a testament to their commitment to diverse investor needs. While relatively newer compared to some peers, it leverages Bajaj Finserv’s analytical capabilities and risk management framework to provide a competitive option for ultra-short-term parking of funds. It aims to offer stable returns with an emphasis on capital preservation.

Key Features

• Invests in debt and money market instruments with a residual maturity of one day.
• Focus on maintaining a high-quality portfolio to minimize credit risk.
• Offers quick liquidity, which is crucial for emergency savings or transient funds.
• Suitable for both retail and institutional investors seeking safety and accessibility.

Pros

• Backed by the strong and reputable Bajaj Finserv group.
• Competitive expense ratio, making it an attractive option for net returns.
• Good option for new investors who prefer a trusted and emerging brand in the AMFI space.
• Utilizes modern portfolio management techniques for optimal daily returns.

Cons

• Shorter track record compared to some older overnight funds, though this is less critical for overnight funds due to their nature.
• Brand recognition in mutual funds is growing but might not be as widespread as the oldest players.
• Similar to all overnight funds, returns are limited and not designed for aggressive growth.

Fees/Rate

Expense Ratio (Direct Plan, Growth): Approximately 0.12% (as of early 2024). Returns are competitive within the overnight category, generally between 6.4% and 7.4% per annum.

👉 Check Bajaj Finserv Overnight Fund

4. ICICI Prudential Overnight Fund

ICICI Prudential Mutual Fund is another titan in the Indian asset management landscape. Their Overnight Fund is a popular choice, benefiting from the fund house’s extensive experience and robust risk management framework. It provides investors with a highly secure and liquid avenue to manage their short-term cash flows, making it an excellent component of a diversified portfolio for liquidity management.

Key Features

• Invests solely in instruments that mature in one day, ensuring zero interest rate risk.
• Offers the flexibility of instant redemption through various digital platforms.
• Maintains a very low-risk profile, prioritizing the safety of capital.
• Suitable for investors with surplus funds that need to be deployed or accessed quickly.

Pros

• Backed by the formidable ICICI Bank and Prudential Plc, offering high credibility.
• Strong liquidity provisions, including instant redemption facilities.
• Consistent performance in line with the overnight rates.
• Broad acceptance and availability across investment platforms.

Cons

• Returns are modest and are not designed to beat inflation significantly over time.
• While the expense ratio is competitive, it’s still a factor for ultra-short term investments.
• The fund’s objective is strictly capital preservation, limiting its use for growth-oriented investors.

Fees/Rate

Expense Ratio (Direct Plan, Growth): Approximately 0.09% (as of early 2024). Expected returns generally align with the short-term money market rates, typically 6.6% to 7.6% per annum.

👉 Check ICICI Prudential Overnight Fund

5. SBI Overnight Fund

As part of India’s largest public sector bank, SBI Mutual Fund brings an unparalleled level of trust and stability to its offerings. The SBI Overnight Fund is designed for the most conservative investors who seek absolute safety and immediate liquidity for their surplus funds. It’s an ideal solution for individuals, trusts, and institutions managing daily cash flows or building a secure emergency corpus.

Key Features

• Invests in one-day maturity instruments, ensuring minimal volatility and risk.
• Provides exceptional liquidity, with funds typically available on the next business day.
• Managed under the strict guidelines of SBI Mutual Fund’s robust compliance framework.
• Suitable for investors who prioritize capital protection over high returns.

Pros

• Unmatched trust and reliability associated with the State Bank of India brand.
• Often features one of the lowest expense ratios in the category, benefiting investors.
• Excellent for parking large sums of money for a very short duration.
• Widely accessible through SBI’s extensive network and digital platforms.

Cons

• Returns are primarily driven by the overnight money market rates and thus are limited.
• Not a suitable investment for achieving long-term financial goals or significant wealth appreciation.
• The focus is entirely on safety and liquidity, not growth.

Fees/Rate

Expense Ratio (Direct Plan, Growth): Approximately 0.07% (as of early 2024). Returns are competitive within the overnight fund space, usually ranging from 6.8% to 7.9% per annum.

👉 Check SBI Overnight Fund

How to Choose the Right Overnight Fund for Your SIP in 2026

Choosing an overnight fund might seem straightforward due to their low-risk nature, but a thoughtful selection, especially for SIPs, can still optimize your liquidity management. Here are key factors Indian investors should consider:

1. Expense Ratio

Since overnight funds offer modest returns, the expense ratio plays a significant role in your net earnings. A lower expense ratio means a larger portion of the fund’s returns are passed on to you. Always compare the direct plans, as they typically have lower expense ratios than regular plans.

2. Fund House Reputation and AUM

While overnight funds are inherently low-risk, investing with a reputable fund house (like HDFC, ICICI, SBI, Franklin India, or Bajaj Finserv) provides an added layer of confidence. A higher Asset Under Management (AUM) for the fund house can also indicate stability and operational efficiency, although it’s less critical for overnight funds compared to equity funds.

3. Liquidity and Redemption Process

The primary purpose of an overnight fund is liquidity. Ensure the fund offers quick and hassle-free redemption. Many funds now offer instant redemption up to a certain limit (e.g., INR 50,000) for retail investors, with the remaining amount credited on the next business day. Check these features before investing.

4. Consistency of Returns

Look at the historical performance of the fund. While returns are tied to overnight rates, a fund that consistently delivers returns slightly above its peers or benchmark is generally preferred. Analyse the past 1-year and 3-year returns to gauge consistency, though remember past performance is not indicative of future results.

5. Your Financial Goal and Horizon

Clearly define why you are doing a SIP into an overnight fund. Is it for an emergency fund, a short-term goal, or as a stepping stone for an STP? This clarity will help you appreciate the fund’s role in your portfolio and manage your expectations regarding returns. If your horizon is truly just a few days or weeks, an overnight fund is ideal. For anything longer (e.g., 3-6 months), liquid funds might offer marginally better returns with slightly less liquidity, while for 6 months to 1 year, ultra-short duration funds could be considered.

6. Ease of Investment (SIP Facility)

Ensure that the fund allows for SIP investments with a low minimum amount, making it convenient for regular, systematic contributions. Most platforms support SIPs for overnight funds, but it’s always good to confirm.

Our Top Picks for Overnight Mutual Funds for SIP in 2026

Based on our analysis of performance, expense ratios, fund house reputation, and suitability for SIP investments for Indian investors in 2026, here are our top three recommendations:

1. Franklin India Overnight Fund

Why it’s our top pick: Franklin India has a long-standing reputation for robust debt fund management. This fund consistently delivers stable returns with a very low-risk profile and excellent liquidity. It’s ideal for building an emergency fund or parking short-term surpluses for critical expenses, offering peace of mind and competitive returns within its category.

2. HDFC Overnight Fund

Why it’s a strong contender: Backed by one of India’s largest financial institutions, the HDFC Overnight Fund boasts a very low expense ratio and high liquidity. Its large AUM and the trust associated with the HDFC brand make it a reliable choice for any investor prioritizing safety and quick access to funds. It’s a solid option for both retail and institutional investors.

3. Bajaj Finserv Overnight Fund

Why it’s a noteworthy choice: Despite being a relatively newer player in the mutual fund space, Bajaj Finserv brings a strong brand and a commitment to efficient fund management. Its Overnight Fund is competitive in terms of expense ratio and risk management, making it an excellent option for investors looking for a reliable fund from a dynamically growing financial conglomerate.

Investing in overnight mutual funds via SIPs in 2026 can be a smart move for Indian investors who prioritize safety, liquidity, and a slight edge over traditional savings accounts for their short-term financial needs. While the returns might be modest, the peace of mind and ease of access they offer are invaluable for managing your daily finances, emergency corpus, or short-term goals. Carefully consider your specific requirements and choose a fund that aligns with your liquidity needs and risk appetite. Don’t wait to secure your short-term funds – explore these top overnight funds today and make an informed decision for your financial well-being!