What are Liquid Funds?
Liquid funds are open-ended debt funds, which primarily invest in fixed income securities having very short residual maturity periods. According to the SEBI’s circular on categorisation & rationalisation of mutual fund schemes, liquid funds have to invest in debt and money market instruments having residual maturity period of up to 91 days only.
Top 10 Liquid Funds to Invest
| Fund Name | Returns (%) | |||
| 1 month | 3 month | 6 month | 1 year | |
| ITI Liquid Fund | 5.62 | 6.10 | 6.67 | 6.93 |
| Franklin India Liquid Fund | 5.66 | 5.97 | 6.78 | 7.08 |
| Tata Liquid Fund | 5.61 | 5.96 | 6.72 | 7.06 |
| Mahindra Manulife Liquid Fund | 5.70 | 5.95 | 6.65 | 7.03 |
| Edelweiss Liquid Fund | 5.65 | 5.94 | 6.68 | 7.05 |
| Axis Liquid Fund | 5.64 | 5.94 | 6.72 | 7.07 |
| Nippon India Liquid Fund | 5.61 | 5.94 | 6.70 | 7.04 |
| Quant Liquid Plan | 5.65 | 5.93 | 6.54 | 7.03 |
| Aditya Birla Sun Life Liquid Fund | 5.67 | 5.93 | 6.72 | 7.06 |
| Groww Liquid Fund | 5.67 | 5.93 | 6.75 | 7.08 |
Data as on September 1, 2025
Why Invest in Liquid Funds
- As liquid funds invest in bonds & other fixed income securities with very short residual maturity period, these funds have one of the lowest interest rate risk and MTM volatility among all debt fund categories.
- These funds seek to generate accrual income by investing in high quality debt papers and money market instruments having high liquidity
- As liquid funds have high capital protection features, these can be used by investors to park their emergency fund and short term surpluses or to meet their financial goals maturing within the short term
- Higher liquidity and capital protection features of liquid funds make them an efficient tool for proprietors and businesses to manage their working capital requirements
- The same features also make liquid funds an efficient tool for retirees to park the part of their post-retirement corpus required for their meeting daily living expenses and short term financial goals
- Liquid funds can have the potential to generate higher post-tax returns than savings bank accounts or short term FDs