Best Liquid Funds: Invest in Top Performing Liquid Funds in India (2024)

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Liquid Funds

Liquid Funds

Average Return 6.06%
No of Funds 33

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What is Liquid Mutual Fund

Liquid funds are debt funds that lend to companies for a period of up to 91 days. These are the safest funds amongst all the mutual fund categories, owing to their extremely low lending duration.

Advantages of Liquid Funds

Suitable for putting money aside for emergencies
Near zero risk of loss if someone invests for at least one month
Have given up to 50% to even at times 100% higher returns than the savings bank account

Top schemes of Liquid Mutual Funds sorted by Returns

33 funds

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Quant Liquid Fund

#15 of 34

ETM Rank: Genius only

Fund Size

₹2,486 Crs

Return (p.a)

+ 7.11%+ 0.59% + 7.1%+ 1.16% + 7.13%+ 2.05% + 7.23%+ 3.89% + 6.75%+ 10.8% + 6.08%+ 16.65%

ETM Rank

#15 of 34

Genius only

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Mahindra Manulife Liquid Fund

#1 of 34

ETM Rank: Genius only

Fund Size

₹1,417 Crs

Return (p.a)

+ 7.21%+ 0.59% + 7.24%+ 1.19% + 7.34%+ 2.11% + 7.45%+ 4.01% + 6.92%+ 11.08% + 5.99%+ 16.38%

ETM Rank

#1 of 34

Genius only

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Aditya Birla Sun Life Liquid Fund

#2 of 34

ETM Rank: Genius only

Fund Size

₹51,991 Crs

Return (p.a)

+ 7.12%+ 0.59% + 7.2%+ 1.18% + 7.33%+ 2.11% + 7.46%+ 4.02% + 6.93%+ 11.09% + 5.99%+ 16.36%

ETM Rank

#2 of 34

Genius only

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Edelweiss Liquid Fund

#3 of 34

ETM Rank: Genius only

Fund Size

₹5,722 Crs

Return (p.a)

+ 7.13%+ 0.59% + 7.21%+ 1.18% + 7.35%+ 2.11% + 7.5%+ 4.03% + 6.92%+ 11.08% + 5.98%+ 16.36%

ETM Rank

#3 of 34

Genius only

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Union Liquid Fund

#14 of 34

ETM Rank: Genius only

Fund Size

₹5,094 Crs

Return (p.a)

+ 7.16%+ 0.59% + 7.21%+ 1.18% + 7.3%+ 2.1% + 7.43%+ 4.0% + 6.9%+ 11.05% + 5.97%+ 16.31%

ETM Rank

#14 of 34

Genius only

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PGIM India Liquid Fund

#4 of 34

ETM Rank: Genius only

Fund Size

₹447 Crs

Return (p.a)

+ 7.05%+ 0.58% + 7.16%+ 1.18% + 7.29%+ 2.1% + 7.42%+ 3.99% + 6.89%+ 11.04% + 5.96%+ 16.28%

ETM Rank

#4 of 34

Genius only

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Baroda BNP Paribas Liquid Fund

#13 of 34

ETM Rank: Genius only

Fund Size

₹11,400 Crs

Return (p.a)

+ 7.08%+ 0.58% + 7.16%+ 1.18% + 7.27%+ 2.09% + 7.4%+ 3.98% + 6.88%+ 11.02% + 5.95%+ 16.27%

ETM Rank

#13 of 34

Genius only

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Axis Liquid Fund

#9 of 34

ETM Rank: Genius only

Fund Size

₹28,808 Crs

Return (p.a)

+ 7.08%+ 0.58% + 7.17%+ 1.18% + 7.29%+ 2.1% + 7.43%+ 4.0% + 6.89%+ 11.04% + 5.95%+ 16.27%

ETM Rank

#9 of 34

Genius only

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Liquid Funds Returns Calculator

See what your investment would have yielded in

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Quant Liquid Fund

Quant Liquid Fund
Mahindra Manulife Liquid Fund
Aditya Birla Sun Life Liquid Fund
Edelweiss Liquid Fund
Union Liquid Fund
PGIM India Liquid Fund
Baroda BNP Paribas Liquid Fund
Axis Liquid Fund
Mirae Asset Liquid Fund
Bank of India Liquid Fund
Nippon India Liquid Fund
Sundaram Liquid Fund
UTI Liquid Fund
LIC MF Liquid Fund
HSBC Liquid Fund
DSP Liquidity Fund
ICICI Prudential Liquid Fund
Franklin India Liquid Fund
Tata Liquid Fund
Bandhan Liquid Fund
Kotak Liquid Fund
SBI Liquid Fund
Invesco India Liquid Fund
JM Liquid Fund
HDFC Liquid Fund
Canara Robeco Liquid Fund
Navi Liquid Fund
360 ONE Liquid Fund
WhiteOak Capital Liquid Fund
Quantum Liquid Fund
Parag Parikh Liquid Fund
Motilal Oswal Liquid Fund
TRUSTMF Liquid Fund

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Invested Gains

You would have got

Total investment Invested ₹ 6 Lakh

Profit ₹ 3.33 Lakh

Current value Current value ₹ 9.33 Lakh

This fund has generated an XIRR of 6.08% over the past 5 Years

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How do Liquid Mutual Funds Work?
Who Should Invest in Liquid Funds?
Taxation on Liquid Funds
How to invest in Liquid Funds?
Frequently Asked Questions

How do Liquid Mutual Funds Work?

To understand how liquid funds work, you need to know where they invest and how they generate returns.

Where do Liquid Funds Invest: A liquid fund will typically hold securities that are short term, of good credit quality, and highly liquid. A recent set of guidelines issued by SEBI has helped to reinforce these fund features.Liquid funds can invest only in listed commercial paper, and they have an overall exposure limit of 25% in a sector. They are not permitted to invest in risky assets as defined by SEBI norms. These norms aim to contain credit risk that is the risk of default by the company whose papers the liquid fund is holding.Further, liquid funds must hold at least 20% of their assets in liquid products (cash and cash equivalents such as money market securities). This ensures that they can quickly meet any redemption demands.
Sources of Earnings: Liquid funds earn mainly through interest payments on their debt holdings; a very small part of their income is generated via capital gains. This is a defining feature of liquid funds, so let us understand it in some detail.When interest rates fall, bond prices go up. When interest rates rise, bond prices fall. The negative relation between bond prices and interest rates is stronger for long term bonds. This means that the longer the maturity of a bond, the more it responds to changes in market yields.Since a liquid fund invests only in short term securities, its market value does not respond much when interest rates change in the market. This means that liquid funds do not have significant capital gains or losses. In a rising interest rate environment, liquid funds often outperform other debt funds because (i) their interest earnings are going up (ii) their market values suffer only to a limited extent due to capital losses. In market jargon, we say that liquid funds have a very low-interest rate risk.

Who Should Invest in Liquid Funds?

Investors with a short investment horizon: Liquid funds are best suited for those with an investment horizon of up to 3 months, as the funds invest in securities with comparable maturities. Investors with longer investment horizons, say 6 months to a year, should invest in slightly longer duration funds (say ultra short duration funds) so that they can earn higher returns.
Investors who invest in bank deposits: Investors who keep their surplus funds in bank deposits can benefit from liquid funds on two fronts: greater withdrawal flexibility and better returns. In a traditional bank fixed deposit, funds are locked in for a fixed period; and an interest penalty is imposed on premature withdrawal. In contrast, liquid funds offer flexible holding periods with easy exit options. Money in bank savings accounts can be withdrawn at any time, but they offer around 3% to 4% interest only, which is lower than the 5% plus usually earned by a liquid fund.
Investors who want to keep Contingency Funds: The purpose of liquid funds is to provide liquidity and safety while generating better than fixed deposit returns. Hence investors can park an emergency or contingency corpus in a liquid fund with the assurance that it will be safe and can be redeemed when necessary.
Investors who need to Park Funds Temporarily: Liquid funds are cash management products that are designed to keep funds safe while earning a small return. Hence, a large sum of money, say, from a bonus or sale of property or inheritance, can be temporarily parked in a liquid fund until the investor decides how to invest the corpus.
Medium to Route investments in Equity Funds: Investors can hold funds in a liquid fund and use an STP to route investments systematically into an equity fund. This enables them to invest in equity periodically, while at the same time, the corpus in the liquid fund earns stable returns.

Taxation on Liquid Funds

Investors earn dividends and capital gains from liquid funds. Dividends are taxable in the hands of investors from the financial year 2020-21, while earlier, they were tax-free in the hands of investors. If an investor earns a capital gain by redeeming the units of the fund at a price higher than his or her purchase price- then the capital gains are taxable.

Short-term Capital Gains: If an investor sells or redeems the units of a liquid fund after a holding period of up to 3 years, he or she is deemed to have earned short term capital gains. This is taxed at the income tax slab rate applicable to the investor.
Long-term Capital Gains Tax: If a liquid fund is redeemed/sold after being held for more than 3 years, the capital gain is treated as a long-term capital gain, and the investor gets the benefit of indexation. This means that the purchase price is increased to adjust for inflation (using an index provided by the Government) before calculating the capital gain. Long term capital gains are currently taxed at a rate of 20% after indexation.

How to invest in Liquid Funds?

It is quite easy to invest in Liquid mutual funds on ET Money. Here are the steps that you have to follow.

Register online on ET Money app or website
Head to Mutual Funds sections and choose the Liquid fund you want to invest in.
Click on invest and choose the amount and mode of investment (SIP or Lumpsum)
Provide your KYC details (Pan number, Bank details) and complete your investment.

Frequently Asked Questions

Which are the best Liquid Mutual Funds to invest in 2024?

These are top 5 Liquid funds you can invest in 2024

Fund Name	Fund Category	ETM Rank	5 Year Return (Annualized)
Quantum Liquid Fund	Debt	# 26 of 34	4.99 % p.a.
Canara Robeco Liquid Fund	Debt	# 6 of 34	5.15 % p.a.
Quant Liquid Fund	Debt	# 15 of 34	5.73 % p.a.
TRUSTMF Liquid Fund	Debt	Unranked	NA
PGIM India Liquid Fund	Debt	# 4 of 34	5.35 % p.a.

How long should I stay invested in Liquid Mutual Funds?

Liquid Debt Mutual Funds are ideal for an investment horizon of 7 days to up to a year.

Where do Liquid Mutual Funds invest?

Liquid funds lend for a period of up to 91 days. They mostly lend to borrowers who are financially strong and also to the government.

Are Liquid Mutual Funds high risk?

Liquid Funds are one of the safest funds as their lending duration is extremely short and the quality of borrowers extremely good.

What kind of returns can i earn from Liquid ?

Liquid Funds have on an average delivered 7.34% p.a. returns in the last 1 year. Their 3 and 5 year annualized returns are 6.06% and 5.26%. p.a.

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