Understanding Money market funds in India

Introduction-
Cash is not a liquid and safe investment for most conservative Indian investors. They are miles away from the amounts that are provided in the traditional saving accounts. It makes sense to invest in money market funds or MMFs. These can be added along with fixed deposits and other such investments during the reading of personal finance; however, there are clearly defined advantages as well as disadvantages, which make these more suitable for some investors.
This article offers a single huge understanding of money market funds in India-from their characteristics, types, and tax implications to the advantages and disadvantages of money market funds and their competition with savings accounts.
What are Money Market Funds?
Some forms of mutual funds invest in some short-term low-risk instruments that are money market funds: treasury bills, commercial papers, certificates of deposit, or repo. The primary purposes behind thisscheme include three – liquid, preserving capital and, to be slightly ahead on returns rather than just keeping money in a standard savings account.
Besides these, the Securities and Exchange Board of India also regulates the MMFs. This is to ensure that the government has a legal structure of protection to its investors and is transparent. The reason is that the money market funds are always invested in secured and predominantly liquid with low-risk instruments. As an average, their returns are always low compared with the riskier ones say, equity mutual funds.
Here are the features of money market funds:
1. Less Risky
Money market funds in investments put into highly rated, short-term securities that can be said to boast the feature of having a far lower likelihood of defaults when compared to bonds or equitites having longer tenors. Also here, the only aim is capital preservation; they are more likely investing in securities by the government and high-rated corporate bonds.
2. Liquidity
The most characteristic of money market funds