Optimise returns on short-term corpus with liquid and overnight funds

Yields from these schemes are attractive currently, but could come down if rate cuts happen

Cash-rich investors looking for short-tenure avenues are in a sweet spot. Liquid and overnight funds, which are ideal for parking money for a short period – a week to a month – are providing annualised yield to maturity (YTM) surpassing 6.5 per cent, higher than the average return of 3.5 to 4 per cent offered by savings bank accounts.

“The Reserve Bank of India (RBI) has increased the policy rate by 250 basis points since May 2022 to 6.5 per cent. The banking system’s liquidity has remained in neutral to deficit for the past several months. Consequently, short-term rates (one