PGIM India Money Market Fund: A good option for parking your short term funds in current interest rate scenario

What are money market funds?

Money market funds are debt mutual fund schemes which invest in debt and money market instruments with residual maturities of up to 1 year. Money market funds usually invest in commercial papers (CPs), certificates of deposits (CDs), Treasury Bills, overnight securities (TREPs) etc. The interest risk of these funds tends to be moderately low since their maximum maturities are up to 1 year. In this article, we will review PGIM India Money Market Fund.

Current interest rate environment

The US Federal Reserve has held interest rates (Fed Funds Rate) steady at 5.25 – 5.5% since July 2023. The RBI has also kept the repo rates at 6.5% for the last one year. The US Fed indicated in its January FOMC meeting that it may cut interest rates in 2024. Other central banks, including the RBI, are expected to follow suit in cutting interest rates. Long duration bond yields have declined in anticipation of rate cuts, but yields up to 1 year maturities are still firm. The 364 day Treasury Bill yield rose by a few basis points in January due to spike in inflation caused by high vegetable prices and has eased slightly since then but is still over 7.1% (as on 28^th February 2024, source: RBI). Credit spreads have widened and are at roughly 0.7% for commercial papers of 1 year maturities (as on 29^th February 2024).

Why invest in money market funds now?

Short term yields remain firm (see the chart below) and provide attractive investment opportunities for investors to park their idle money in money market funds for period of 1 year or so, instead of keeping their monies in savings bank account or short term Fixed Deposits. Current interest rates (as on 1^st March 2024) on deposits of up to 1 year in major public sector or private sector banks arearound 6.5 – 7% (source: Bank Bazaar). Yields of money market funds are currently in the range of 7 – 7.9% (source: Advisorkhoj.com as on 29^th February 2024), higher than interest rates of traditional fixed income investments like bank fixed deposits of comparable tenures.

Source: Reserve Bank of India, as on 29^th February 2024

Furthermore the G-Sec yield curve is flat in the 1 year to 10 year maturities range. You can consider investing in money market funds when yields are high before they fall, when the impending rate cuts kick in.

Source: worldgovernmentbonds.com, as on 11^th March 2024

PGIM India Money Market Fund

PGIM India Money Market Fund was launched around 4 years back in March 2020. The expense ratio of the scheme is just 0.53% (as on 29^th February 2024). The scheme has given 7.25% returns in the last 1 year (see the chart below).

Source: Advisorkhoj Research (as on 29^th February 2024)

Portfolio positioning and strategy

• The fund may invest across a range of money market instruments including Commercial Papers (CPs), Certificates of Deposits (CDs), Treasury Bills, Repo and Tri-Party Repo (TREPS). CP investments are restricted to high grade CPs (with long term ratings of A1+/AAA)


• The scheme endeavours to invest its assets into a 12 months roll-down structure from mid-March to mid-March every year.* The rationale being the typical liquidity tightness during mid-March that usually leads to yields spiking at the short end of the curve up to 1 year maturity.

* This is the current investment strategy based on the prevailing market conditions and is subject to change within the limits of the SID, basis the fund manager’s view.

High Credit Quality

Credit quality is one of the most important considerations while selecting debt funds. PGIM India Money Market Fund portfolio comprises of only AAA/A1+ rated securities and Sovereign Bonds. The chart below shows the credit quality of the underlying portfolio of PGIM India Money Market Fund over the last 12 months.

Source: PGIM India MF Monthly Portfolios, February 2023 to February 2024

The Yield to Maturity of the PGIM India Money Market Fund is 7.02% (as on 29^th February 2023, while the average residual maturity of the underlying portfolio is 0.11 years (Macaulay Duration of 0.11 years).

Source: PGIM India February 2024 monthly portfolio, Advisorkhoj Research (as 29^th February 2024).

Who should invest in PGIM India Money Market Fund?

• Investors looking for investment avenues to park idle surplus funds for short term and with high liquidity and relatively low return volatility may consider this fund.


• Investors with moderately low risk appetites can invest in this fund.


• Investors with 6 – 12 months investment horizon.


• Investors may consult their financial advisors or mutual fund distributors if PGIM India Money Market Fund is suitable for their investment needs.