Understanding Money Market Mutual Funds in India

Discover the ins and outs of money market mutual funds in India. Gain valuable insights into this popular investment option and make informed decisions for your portfolio.

EXPLORE FUNDS
4 mins
22 August 2023

In the world of investments, diversity is key, and one category that often appeals to investors seeking stability and liquidity is "Money Market Mutual Funds." These funds are specifically designed to offer a safe and efficient way to park surplus funds while generating modest returns. Let’s dive into the realm of money market mutual funds in India, exploring their characteristics, benefits, and how to invest in them.

What are money market mutual funds?

Money Market Mutual Funds, often referred to as money market funds, are a type of mutual fund that primarily invests in short-term debt securities and money market instruments. These instruments are highly liquid, low-risk financial instruments that mature within a short period, typically less than a year. Money market funds provide investors with an opportunity to earn slightly higher returns than traditional savings accounts or fixed deposits, while still maintaining a high level of liquidity and safety.

What is a money market?

The money market refers to a segment of the financial market where short-term borrowing and lending of funds take place. It deals with instruments that have a maturity period of up to one year. The money market serves as a crucial component of the overall financial system, facilitating liquidity management for institutions and offering a platform for governments, corporations, and financial institutions to meet their short-term funding needs.

Types of money market instruments

Some common types of money market instruments are:

  • Treasury Bills (T-Bills)
  • Commercial Papers (CPs)
  • Certificate of Deposits (CDs)
  • Repurchase Agreements (Repos)

How do money market funds work?

Money market funds pool money from multiple investors and invest in a diversified portfolio of money market instruments. These funds aim to maintain stability in their net asset value (NAV) and provide investors with a source of income through interest earned on their investments. The returns from money market funds are typically higher than traditional savings accounts, making them an attractive option for parking surplus funds temporarily.

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Disclaimer

Bajaj Finance Limited (“BFL”) is a Non-Banking Financial Company carrying the business of acceptance of deposits, providing lending solutions to Retail & Corporate customers, and is a Corporate agent of various insurance Companies. BFL is also registered with the Association of Mutual Funds in India (“AMFI”) as a distributor of third party Mutual Funds (shortly referred as ‘Mutual Funds’).

BFL does NOT:

(i) provide investment advisory services in any manner or form;

(ii) perform risk profiling of the investor;

(iii) carry customized/personalized suitability assessment;

(iv) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.


In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on ‘As-is’ basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme /Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities. The NAV will inter-alia be exposed to Price / Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other / better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

Bajaj Finserv Direct Limited, (“BFDL”), a wholly owned subsidiary of Bajaj Finserv Limited (is a Registered with SEBI as an Investment Advisor with Registration no. INA000016083). BFDL enables resident Indian customers to directly invest in third party mutual funds through its online platform. BFDL entered into a referral arrangement with BFL, whereunder, BFL may, without risk or responsibility on its part, refer the resident Indian customers who are interested in placing their investments in Direct Mutual Funds through BFDL online platform. Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.

Disclaimer on Risk-O-Meter:
Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc. and shall also consult their financial advisers, if they are unsure about the suitability of the scheme before investing