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Best Liquid Mutual Funds

Liquid funds invest in short-term debt and money market instruments such as commercial paper, government securities, certificates of deposits, etc. These schemes do not have a lock-in period. Hence, investors can redeem their funds anytime they want. Also, there’s no exit load on liquid funds after the completion of six days from the date of purchase. In most cases, the fund house transfers an investor’s money the very next day after an investor redeems his/her units. The best liquid mutual funds focus on capital preservation while generating steady returns.

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List of Liquid Mutual Funds in India

Fund NameCategoryRisk1Y ReturnsRatingFund Size(in Cr)
Quant Liquid FundDebtModerate4.0%5₹576
IDBI Liquid FundDebtModerate3.5%5₹804
Mahindra Manulife Liquid FundDebtLow to Moderate3.5%5₹1,607
Edelweiss Liquid FundDebtModerate3.5%5₹1,128
Aditya Birla Sun Life Liquid FundDebtModerate3.5%4₹34,891
PGIM India Liquid FundDebtLow to Moderate3.5%4₹631
LIC MF Liquid FundDebtLow to Moderate3.5%4₹5,755
Union Liquid FundDebtModerate3.5%4₹1,040
Baroda BNP Paribas Liquid Direct FundDebtModerate3.6%4₹6,968
Mirae Asset Cash Management FundDebtLow to Moderate3.5%4₹3,378
Sundaram Liquid FundDebtModerate3.5%4₹1,828
Navi Liquid FundDebtModerate3.8%4₹82
Sundaram Money FundDebtLow to Moderate3.4%3₹3,144
Franklin India Liquid FundDebtLow to Moderate3.5%3₹1,523
Nippon India Liquid FundDebtModerate3.5%3₹25,763
View All

Features of Liquid Mutual Fund

Here are some features of liquid funds:

Asset allocation: As per the Securities and Exchange Board of India (SEBI) rules, liquid mutual funds must invest in debt and money market instruments with a maximum maturity period of 91 days. 

Risk-reward ratio:  The returns generated by top liquid mutual funds depend on the market price of the underlying debt and money market instruments. Nevertheless, since the prices of these short-term securities do not change as much as that of mid-term and long-term bonds, these funds are much more stable than other debt fund schemes. 

Taxability

Short-term Capital Gains Tax: In case investors sell their units in a liquid fund before a holding period of 3 years, he/she will earn short-term capital gains. Such gains are added to the individual’s income for the financial year and taxed as per their slab rate. 

Long-term Capital Gains Tax: When investors sell units after 3 years from the date of purchase, the proceeds are referred to as long-term capital gains. A tax rate of 20% along with indexation benefit is applicable on such gains. 

Who Are These Funds Suited For?

The best liquid mutual funds 2022 are a suitable option for investors with a short-term investment horizon. These schemes have the potential to generate higher returns than a savings bank account. Liquid funds are also appropriate for contingency funds. The schemes primarily focus on capital preservation while generating stable returns. Also, investors can redeem their units in a fund whenever it is necessary. Nevertheless, before investing in the best liquid mutual funds, they must keep certain things in mind. Let’s find out what they are: 

Risk appetite: Liquid funds are the least risky of all debt funds. However, one must note that “least risky” doesn’t mean that there’s no risk at all. Like other types of debt funds, they are subject to interest rate risk and credit risk. Hence, investors must assess their risk profile before allocating their savings to these mutual fund schemes. 

Investment goal: One must note that liquid funds do not focus on wealth maximisation; they are focused on safeguarding one’s capital while generating a modest return. Investors must make sure that their financial goals are in sync with the objective of a scheme they choose. 

Expense ratio: Comparing the expense ratio of different schemes is imperative for investors looking for the best liquid mutual fund. These schemes more or less earn similar returns. Hence, a fund with a high expense ratio will significantly reduce the returns generated. For example, suppose two funds deliver returns of 5% and 5.5%, respectively. Let’s say the expense ratio of the first fund is 0.2%, and the second fund is 0.8%. Therefore, the actual yield will be 4.8% and 4.7%. Hence, a fund with a lower expense ratio may be more profitable for an investor. 

Past performance of the fund: Unlike bank fixed deposits, returns of liquid funds are not fixed as they depend on market interest rates. Hence, it’s essential for investors to check and compare the historical returns of different schemes and opt for one with a consistently strong performance.  Past performance does not guarantee future outcomes. Nevertheless, past performance helps us assess how the fund has responded to economic conditions.

Experience of the fund manager: The success of the best liquid mutual funds depends on the experience and ability of fund managers. They use different risk management techniques to assess the risks associated with an investment and take decisions accordingly. A fund manager with a proven track record is more likely to fulfil the goal of a specific scheme.

Regular or growth plan: When an investor opts for a direct plan, he/she can invest with an asset management company (AMC) directly. In the case of a regular plan, investors have to facilitate the transaction via a third party, for example, a broker or a distributor. Thus, fund houses have to incur commission or brokerage additionally. That’s why regular plans have a higher expense ratio and report a lower NAV.

Major Advantages

Minimal risk: These are associated with lower risk compared to most other mutual funds. They provide stability across different interest rate cycles in the market by investing in high-quality securities with a maturity period of up to 91 days. 

Low cost: The best liquid mutual funds are low-cost options as fund managers do not manage the portfolio of these schemes as actively as other types of debt funds. Most liquid funds have an expense ratio below 1%. This allows the fund to maximise returns for investors. 

Fast redemption process: Fund houses process the redemption request of investors within one business day. Moreover, there are some AMCs that process redemption requests immediately. This is possible only because the underlying securities of these mutual fund schemes are highly liquid. 

Flexible holding period: Investors may remain invested in a fund for as long as they want. They can even withdraw their funds in case of any urgency; no exit load is charged seventh day onwards from the date of purchase. That’s why these funds are a suitable option for investors looking to maintain a contingency fund. 

Choice of investment mode: Individuals can invest in liquid funds in two ways – lump sum and systematic investment plan. By choosing the lumpsum route, investors can allocate the entire amount to a fund in one go. Conversely, a SIP allows one to invest in a scheme by depositing a fixed amount at regular intervals (monthly, quarterly, etc.).

Let's have a closer look

Now let us jump and check about these top 10 mutual fund schemes.

Quant Liquid Direct Plan Growth

Fund Performance: The Quant Liquid Fund has given 5.18% annualized returns in the past three years and 6% in the last 5 years. The Quant Liquid Fund belongs to the Debt category of Quant Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Quant Liquid Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹576Cr
1Y Returns4.0%

IDBI Liquid Fund Direct Growth

Fund Performance: The IDBI Liquid Fund has given 4.42% annualized returns in the past three years and 5.56% in the last 5 years. The IDBI Liquid Fund belongs to the Debt category of IDBI Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in IDBI Liquid Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹804Cr
1Y Returns3.5%

Mahindra Manulife Liquid Fund Direct Growth

Fund Performance: The Mahindra Manulife Liquid Fund has given 4.38% annualized returns in the past three years and 5.54% in the last 5 years. The Mahindra Manulife Liquid Fund belongs to the Debt category of Mahindra Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Mahindra Manulife Liquid Fund via lump sum is ₹1,000 and via SIP is ₹500.

Min Investment Amt₹1,000
AUM₹1,607Cr
1Y Returns3.5%

Edelweiss Liquid Direct Growth

Fund Performance: The Edelweiss Liquid Fund has given 4.37% annualized returns in the past three years and 5.53% in the last 5 years. The Edelweiss Liquid Fund belongs to the Debt category of Edelweiss Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Edelweiss Liquid Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹1,128Cr
1Y Returns3.5%

Aditya Birla Sun Life Liquid Fund Direct Growth

Fund Performance: The Aditya Birla Sun Life Liquid Fund has given 4.35% annualized returns in the past three years and 5.51% in the last 5 years. The Aditya Birla Sun Life Liquid Fund belongs to the Debt category of Aditya Birla Sun Life Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Aditya Birla Sun Life Liquid Fund via lump sum is ₹500 and via SIP is ₹500.

Min Investment Amt₹500
AUM₹34,891Cr
1Y Returns3.5%

PGIM India Liquid Fund Direct Plan Growth

Fund Performance: The PGIM India Liquid Fund has given 4.34% annualized returns in the past three years and 5.5% in the last 5 years. The PGIM India Liquid Fund belongs to the Debt category of PGIM India Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in PGIM India Liquid Fund via lump sum is ₹100 and via SIP is ₹1,000.

Min Investment Amt₹100
AUM₹631Cr
1Y Returns3.5%

LIC MF Liquid Fund Direct Growth

Fund Performance: The LIC MF Liquid Fund has given 4.33% annualized returns in the past three years and 5.48% in the last 5 years. The LIC MF Liquid Fund belongs to the Debt category of LIC Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in LIC MF Liquid Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹5,755Cr
1Y Returns3.5%

Union Liquid Fund Direct Growth

Fund Performance: The Union Liquid Fund has given 4.31% annualized returns in the past three years and 4.68% in the last 5 years. The Union Liquid Fund belongs to the Debt category of Union Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Union Liquid Fund via lump sum is ₹5,000 and via SIP is ₹2,000.

Min Investment Amt₹5,000
AUM₹1,040Cr
1Y Returns3.5%

Baroda BNP Paribas Liquid Direct Fund Growth

Fund Performance: The Baroda BNP Paribas Liquid Direct Fund has given 4.3% annualized returns in the past three years and 5.49% in the last 5 years. The Baroda BNP Paribas Liquid Direct Fund belongs to the Debt category of Baroda Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Baroda BNP Paribas Liquid Direct Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹6,968Cr
1Y Returns3.6%

Mirae Asset Cash Management Fund Direct Growth

Fund Performance: The Mirae Asset Cash Management Fund has given 4.29% annualized returns in the past three years and 5.46% in the last 5 years. The Mirae Asset Cash Management Fund belongs to the Debt category of Mirae Asset Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Mirae Asset Cash Management Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹3,378Cr
1Y Returns3.5%

Sundaram Liquid Direct Growth

Fund Performance: The Sundaram Liquid Fund has given 4.28% annualized returns in the past three years and 5.26% in the last 5 years. The Sundaram Liquid Fund belongs to the Debt category of Sundaram Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Sundaram Liquid Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹1,828Cr
1Y Returns3.5%

Navi Liquid Fund Super Institutional Plan Direct Growth

Fund Performance: The Navi Liquid Fund has given 4.07% annualized returns in the past three years and 5.36% in the last 5 years. The Navi Liquid Fund belongs to the Debt category of Navi Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Navi Liquid Fund via lump sum is ₹1,000 and via SIP is ₹500.

Min Investment Amt₹1,000
AUM₹82Cr
1Y Returns3.8%

Sundaram Money Direct Growth

Fund Performance: The Sundaram Money Fund has given 4.79% annualized returns in the past three years and 5.71% in the last 5 years. The Sundaram Money Fund belongs to the Debt category of Sundaram Mutual Funds.

Minimum Investment Amount:

Min Investment Amt₹1,000
AUM₹3,144Cr
1Y Returns3.4%

Franklin India Liquid Fund Direct Growth

Fund Performance: The Franklin India Liquid Fund has given 4.38% annualized returns in the past three years and 5.54% in the last 5 years. The Franklin India Liquid Fund belongs to the Debt category of Franklin Templeton Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Franklin India Liquid Fund via lump sum is ₹10,000 and via SIP is ₹500.

Min Investment Amt₹10,000
AUM₹1,523Cr
1Y Returns3.5%

Nippon India Liquid Fund Direct Growth

Fund Performance: The Nippon India Liquid Fund has given 4.33% annualized returns in the past three years and 5.5% in the last 5 years. The Nippon India Liquid Fund belongs to the Debt category of Nippon India Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Nippon India Liquid Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹25,763Cr
1Y Returns3.5%

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