Anxious Indian firms concerned about credit risk, buying shortest-term debt

The IL&FS stumbles were a reminder that money-market funds, which account for a fourth of Rs 23 trillion of industry assets, are also fraught with risk

Corporate treasury departments in India have become so concerned about credit risk they’re increasingly parking their cash in securities maturing overnight.

Assets with overnight funds soared to Rs 123 billion ($1.8 billion) last month, from Rs 39 billion in September, as companies chose safety over returns in the wake of a rare debt default, data from Morningstar Investment Adviser India Pvt. show.

Strong demand has seen five firms, including Reliance Nippon Life Asset Management Ltd., lining up offerings.

Overnight funds could gain more heft if the regulator tightens rules for money-market funds, which in September suffered the worst outflows