{"id":8061,"date":"2021-08-31T06:07:22","date_gmt":"2021-08-31T06:07:22","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=8061"},"modified":"2021-08-31T06:15:47","modified_gmt":"2021-08-31T06:15:47","slug":"money-market-funds-in-india","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/money-market-funds-in-india\/","title":{"rendered":"All You Need to Know About Money Market Funds in India"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Money Market Funds (MMF) invest in short-term debt instruments, cash &amp; cash equivalent, rated high quality. So, investors with lower risk patience are always on the lookout for investments options that can provide them good returns in the future while maintaining liquidity for their funds. Different debts funds have been designed to keep this remember. Also, the majority of investors tend to compare the returns on their debt fund investments with bank deposits. When it comes to short-term debt investing, Money Market Funds is the best option among such investors. The average maturity of a Money Market Fund is one year. In this write-up, we are going to discuss about Money Market Funds in India.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3ad4672ea2f\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3ad4672ea2f\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/money-market-funds-in-india\/#What_are_the_Different_Types_of_Money_Market_Instruments\" title=\"What\nare the Different Types of Money Market Instruments?\">What\nare the Different Types of Money Market Instruments?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/money-market-funds-in-india\/#What_is_the_Objective_of_Money_Market_Funds_for_Investors\" title=\"What is the Objective of Money Market Funds for Investors?\">What is the Objective of Money Market Funds for Investors?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/money-market-funds-in-india\/#How_do_Money_Market_Funds_work\" title=\"How do\nMoney Market Funds work?\">How do\nMoney Market Funds work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/money-market-funds-in-india\/#Who_Can_Invest_in_Money_Market_Funds\" title=\"Who Can\nInvest in Money Market Funds?\">Who Can\nInvest in Money Market Funds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/money-market-funds-in-india\/#Important_Points_to_Remember_Before_Investing_in_Money_Market_Funds_in_India\" title=\"Important\nPoints to Remember Before Investing in Money Market Funds in India\">Important\nPoints to Remember Before Investing in Money Market Funds in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/blog\/money-market-funds-in-india\/#What_are_the_Taxation_Rules_in_the_case_of_Money_Market_Funds\" title=\"What\nare the Taxation Rules in the case of Money Market Funds?\">What\nare the Taxation Rules in the case of Money Market Funds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/blog\/money-market-funds-in-india\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Different_Types_of_Money_Market_Instruments\"><\/span>What\nare the Different Types of Money Market Instruments?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Money Market is an exchange where the deal of cash and cash-equivalent instruments takes place. Following are some vital money market instruments in India:<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/08\/Types-of-Money-Market-Instruments.png\" alt=\"Types of Money Market Instruments\" class=\"wp-image-8063\" width=\"499\" height=\"499\" srcset=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/08\/Types-of-Money-Market-Instruments.png 998w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/08\/Types-of-Money-Market-Instruments-150x150.png 150w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/08\/Types-of-Money-Market-Instruments-300x300.png 300w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/08\/Types-of-Money-Market-Instruments-768x768.png 768w\" sizes=\"(max-width: 499px) 100vw, 499px\" \/><\/figure><\/div>\n\n\n\n<ol><li><strong><em>Certificate of Deposit (CD): <\/em><\/strong>It\nis a term deposit that is provided by scheduled commercial banks which doesn&#8217;t\nhave the option of premature redemption. The main difference between a\nCertificate of Deposit and FD is that CDs are generously negotiable, and the\ninvestors are not authorised to withdraw CD until maturity.<\/li><li><strong><em>Treasury Bills (T-Bills)<\/em><\/strong>:\nThese bills are issued by the Indian Government to raise money for a short\nperiod of 365 days. These bills are considered as one of the secured\ninstruments as the government support and monitor these. The return rate, also\nknown as the risk-free rate, is low on Treasury Bills compared to other money\nmarket instruments.<\/li><li><strong><em>Commercial Paper (CPs)<\/em><\/strong>:\nCompanies &amp; financial organisations with a high credit score can issue a\nCommercial Paper (CP), a short-term, unprotected promissory note. CP allows\nsuch companies or organisations to expand their short-term borrowing sources.\nGenerally, Commercial Papers are issued at a discounted rate while the\nredemption is done at face value. The investor earns the difference.<\/li><li><strong><em>Repurchase Agreements (Repos)<\/em><\/strong>:\nThis type of money market instrument is made between a bank and the Reserve\nBank of India to provide short-term loans. It can also be made between two\nbanks.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Objective_of_Money_Market_Funds_for_Investors\"><\/span>What is the Objective of Money Market Funds for Investors?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ol><li>An investor holding a bunch of\nmutual funds from a single fund company may occasionally want to transfer\nassets from one fund to another. If the investor desires to sell a fund before\ndeciding on another fund to purchase, a Money Market Mutual Fund provided by a\nsimilar fund company may be a wise place to park the sale proceeds. Then, at a\nsuitable time, the investor may exchange their MMF holding for shares of some\nother funds in the fund family.<\/li><li>To benefit their customers,\nbrokerage firms regularly use Money Market Mutual Funds to provide the services\nof Cash Management. Investing a customer\u2019s latent cash into Money Market Mutual\nFunds will earn the customer an additional percentage point or two in yearly\nreturns more than those earned by other competent investments.<\/li><li>Money Market Mutual Funds\nprovide a convenient parking place for cash reserves when an investor is not\nquite ready to invest or is anticipating a near-term cash outlay for a\nnon-investment objective. Money Market Mutual Funds provide protection and\nliquidity eventually. This means that investors will have an anticipated amount\nof cash at the very moment that they require it.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_do_Money_Market_Funds_work\"><\/span>How do\nMoney Market Funds work?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>These\nfunds invest in money market instruments with the purpose of providing good\nreturns (interest income) and <strong><em>keeping the NAV (Net Asset Value)<\/em><\/strong>\nfluctuations minimal.<\/p>\n\n\n\n<p>Over\nthe last 5 years below are some best Money Market Funds in India based on the\nperformance:<\/p>\n\n\n\n<ul><li>HDFC Money Market Fund;<\/li><li>SBI Savings Fund;<\/li><li>Aditya Birla Sun Life Money\nManager Fund;<\/li><li>Edelweiss Dynamic Bond Fund;<\/li><li>Franklin India Savings Fund.<\/li><\/ul>\n\n\n\n<p>It\nis essential to make sure that you follow your investment plan before start\ninvesting and the above is not a suggestion but a list of well-performing Money\nMarket Funds in India.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Who_Can_Invest_in_Money_Market_Funds\"><\/span>Who Can\nInvest in Money Market Funds?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>An MMF tries to provide the highest short-term income by maintaining a well-diversified portfolio of money market instruments. Investors having a short investment prospect of up to one year may invest in these funds. Those individuals with a low-risk appetite having their additional cash collected in a saving account can invest in Money Market Funds. These funds have the capability to provide higher returns than a regular savings bank account. The investors could be corporate and retail investors.<\/p>\n\n\n\n<p>In\ncase you have a medium-term to long-term investment horizon, then MMF is not a\nperfect option. Instead, you may go for active bond funds or balanced funds,\nwhich are competent in offering comparatively higher returns.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Important_Points_to_Remember_Before_Investing_in_Money_Market_Funds_in_India\"><\/span>Important\nPoints to Remember Before Investing in Money Market Funds in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following are some crucial points to remember before investing in Money Market Funds in India:<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/08\/Important-Points-to-Remember-Before-Investing-in-Money-Market-Funds-in-India.png\" alt=\"Important Points to Remember Before Investing in Money Market Funds in India\" class=\"wp-image-8077\" width=\"499\" height=\"431\" srcset=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/08\/Important-Points-to-Remember-Before-Investing-in-Money-Market-Funds-in-India.png 998w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/08\/Important-Points-to-Remember-Before-Investing-in-Money-Market-Funds-in-India-300x259.png 300w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/08\/Important-Points-to-Remember-Before-Investing-in-Money-Market-Funds-in-India-768x663.png 768w\" sizes=\"(max-width: 499px) 100vw, 499px\" \/><\/figure><\/div>\n\n\n\n<ul><li><strong><em>Expense Ratio<\/em><\/strong>:\nIt is a tiny percentage (%) of the total assets of the fund charged by the fund\nhouse towards Fund Management Services. Since the returns are not good, then\nthe Expense Ration plays a vital role in determining your earnings from an MMF.\nPreferably, you must look for funds with a lesser Expense Ratio to increase\nyour returns. <\/li><li><strong><em>Risk<\/em><\/strong>:\nThese funds face credit risk, interest rate risk &amp; reinvestment risk. In\nthe interest rate risk, the prices of the underlying asset increase as interest\nrates decline and decrease as interest rates increase. The fund manager may\ninvest in unsafe securities which have a higher probability of default.<\/li><li><strong><em>Tax on Gains<\/em><\/strong>:\nInvesting in debt funds offers you with taxable capital gains. The rate on tax\ndepends on the holding period, that is, for how long you stayed invested in the\nfund. You make an <strong><em>STCG (Short-Term Captain Gain) <\/em><\/strong>when you stay invested for the\ntime of less than 3 years.<\/li><\/ul>\n\n\n\n<p><strong><em>Long-Term Capital Gains (LTCGs)<\/em><\/strong> are made when you stay invested for more than 3 years. Short-Term Captain Gain from MMFs are added to your income and taxed as per your income slab. Long-Term Captain Gain from MMFs is taxed at the rate of 20% after indexation.<\/p>\n\n\n\n<ul><li><strong><em>Financial Goals<\/em><\/strong>: In case if you have to make payments in EMI or invest additional cash while maintaining liquidity, then you can use MMFs. A small amount of your portfolio can be invested in these for diversification.<\/li><li><strong><em>Return<\/em><\/strong>: MMFs have the capability to provide higher returns than a regular savings bank account. But, the returns are not assured. The <strong>NAV (Net Asset Value)<\/strong><sup><a class=\"text-primary\" href=\"https:\/\/en.wikipedia.org\/wiki\/Net_asset_value\"><strong>[1]<\/strong><\/a><\/sup> alters with changes in the overall interest rate rule. A decrease in interest rates may raise the prices of a fundamental asset and deliver good returns.<\/li><li><strong><em>Investment Horizon<\/em><\/strong>: MMFS are valid for very short-term to long-term investment horizons, i.e., 3 months to 1 year. For medium-term horizons, you may invest in other debt funds such as Dynamic Bond Funds.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Taxation_Rules_in_the_case_of_Money_Market_Funds\"><\/span>What\nare the Taxation Rules in the case of Money Market Funds?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>Capital\nGains Tax<\/em><\/strong><\/p>\n\n\n\n<p>If\nyou hold the scheme units for time up to 3 years, then the capital gains earned\nby you are called <strong><em>Short-Term Capital Gains (STCG)<\/em><\/strong>. STCG is added to your taxable\nincome and taxed according to the applicable income tax slab. If you hold the\nscheme units for more than 3 years, then the Capital Gains earned by you are\ncalled Long-Term Capital Gains (LTCG), and it is taxed at 20% with indexation\nadvantages.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Like equity &amp; fixed-income mutual funds have deeply simplified the world of investing, Money Market Funds have made money market investing more accessible to separate retail investors. These funds are among the safest &amp; most liquid available financial instruments. Furthermore, Money Market Funds provide reserved early investment necessities and provide simple procedures for withdrawing funds by transferring to a bank.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/file-an-offer-document-with-sebi\/\">How Can You File An Offer Document with SEBI?<\/a><\/mark><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Money Market Funds (MMF) invest in short-term debt instruments, cash &amp; cash equivalent, rated high quality. So, investors with lower risk patience are always on the lookout for investments options that can provide them good returns in the future while maintaining liquidity for their funds. Different debts funds have been designed to keep this remember. [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":8062,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[64],"tags":[832],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/8061"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=8061"}],"version-history":[{"count":13,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/8061\/revisions"}],"predecessor-version":[{"id":8079,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/8061\/revisions\/8079"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/8062"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=8061"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=8061"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=8061"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}