Best Liquid Mutual Funds in India to Invest in 2024

Last Updated on Oct 17, 2024 by Anjali Chourasiya

Looking for a safe place to park your surplus funds with quick access and better returns than a savings account? Liquid funds in India offer just that—a low-risk, short-term investment option designed for flexibility and ease. These funds invest in high-quality debt instruments maturing within 91 days, providing stability without locking away your money. However, like any investment, they come with certain risks. In this article, we’ll guide you through the best liquid funds in India for 2024, discussing their benefits, potential risks, and how to identify and invest in top-performing funds.

Best Liquid Funds in India – 2024

Name	AUM (Rs. in cr.)	Expense Ratio (%)	CAGR 3Y (%)	CAGR 5Y (%)
Quant Liquid Plan	2,226.59	0.27	6.23	5.76
Mahindra Manulife Liquid Fund	1,416.61	0.16	6.28	5.41
Edelweiss Liquid Fund	5,046.32	0.08	6.26	5.41
Aditya Birla SL Liquid Fund	43,796.91	0.21	6.28	5.39
Union Liquid Fund	3,516.37	0.07	6.26	5.38
PGIM India Liquid Fund	374.40	0.13	6.25	5.38
Franklin India Liquid Fund-Super	2,141.59	0.13	6.21	5.37
LIC MF Liquid Fund	11,403.17	0.16	6.21	5.37
Axis Liquid Fund	25,268.68	0.15	6.26	5.36
Nippon India Liquid Fund	26,468.93	0.20	6.24	5.36

Note: The above information is dated 16th October 2023. The parameters used to filter the list of top flexi cap funds on Tickertape’s Mutual Fund Screener are:

• Category > Debt > Liquid Fund
• Plan > Growth
• 5Y CAGR: Sorted from highest to lowest

🚀 Pro Tip: Use Tickertape’s Mutual Fund Screener to filter and compare funds based on performance, expense ratio, and risk. Find funds that match your goals and risk tolerance for smarter investment choices.

What are liquid funds?

Liquid mutual funds are also known as money-market funds. They ensure high liquidity to the investors by investing their capital in short-term debt instruments and money market securities. They are considered secure investment instruments because of the high credit rating of money market instruments and the minuscule risk of losing the invested capital. 

Some of the instruments that constitute a liquid fund’s portfolio include certificates of deposits (CDs), corporate bonds, treasury bills (T-bills), debentures, commercial paper, and more.

About the Top 10 Liquid Funds in India

Quant Liquid Plan

Launched on 1st January 2004, Quant Liquid Plan is a liquid mutual fund scheme focused on providing high liquidity and stable returns through investments in short-term money market and debt instruments. It is designed to help investors park surplus funds for short durations while maintaining minimal risk.

As of 17th October 2024, Quant Liquid Plan has an asset under management (AUM) of Rs. 2,226.59 cr. and an expense ratio of 0.27%. The fund has delivered a compound annual growth rate (CAGR) of 6.23% over three years and 5.76% over five years.

Mahindra Manulife Liquid Fund

Mahindra Manulife Liquid Fund was introduced on 4th July 2016. It primarily focuses on generating income through a portfolio of short-term money market and debt securities, making it a safe and liquid investment option for investors looking to park funds for a short period.

As of 17th October 2024, the fund has an AUM of Rs. 1,416.61 cr. and an expense ratio of 0.16%. The fund has provided a three-year CAGR of 6.28% and a five-year CAGR of 5.41%.

Edelweiss Liquid Fund

Edelweiss Liquid Fund, launched on 9th December 2007, offers a low-risk investment option with high liquidity by investing in short-term debt and money market instruments. It is suitable for investors seeking short-term parking of funds with low risk.

As of 17th October 2024, Edelweiss Liquid Fund has an AUM of Rs. 5,046.32 cr. and an expense ratio of 0.08%. The fund has achieved a CAGR of 6.26% over three years and 5.41% over five years.

Aditya Birla SL Liquid Fund

Aditya Birla Sun Life Liquid Fund was launched on 31st May 2004. It focuses on providing high liquidity with minimal risk by investing in the money market and short-term debt securities. This fund is suitable for investors with short-term cash management needs.

As of 17th October 2024, Aditya Birla SL Liquid Fund manages an AUM of Rs. 43,796.91 cr. and has an expense ratio of 0.21%. The fund has returned a three-year CAGR of 6.28% and a five-year CAGR of 5.39%.

Union Liquid Fund

Union Liquid Fund launched on 15th June 2011, seeks to provide a low-risk investment option by focusing on short-term debt and money market instruments. The fund prioritises high liquidity and capital preservation for short-duration investments.

As of 17th October 2024, the fund has an AUM of Rs. 3,516.37 cr. with an expense ratio of 0.07%. It has delivered a three-year CAGR of 6.26% and a five-year CAGR of 5.38%.

PGIM India Liquid Fund

PGIM India Liquid Fund, launched on 28th January 2015, invests primarily in money market instruments and short-term debt securities to provide high liquidity with minimal risk. The fund aims to serve as a convenient option for parking short-term funds.

As of 17th October 2024, the AUM of PGIM India Liquid Fund stands at Rs. 374.40 cr., with an expense ratio of 0.13%. The fund has posted a three-year CAGR of 6.25% and a five-year CAGR of 5.38%.

Franklin India Liquid Fund-Super

Franklin India Liquid Fund-Super, introduced on 1st February 2000, focuses on generating income with a high level of liquidity by investing in a mix of money market instruments and short-term debt securities. It caters to investors seeking short-term parking of surplus funds.

As of 17th October 2024, the AUM of the fund is Rs. 2,141.59 cr., and it carries an expense ratio of 0.13%. The fund has returned a three-year CAGR of 6.21% and a five-year CAGR of 5.37%.

LIC MF Liquid Fund

LIC MF Liquid Fund, launched on 15th March 1997, provides high liquidity by investing in money market and short-term debt instruments. The fund is ideal for investors looking for low-risk and liquid investment options for short-term cash needs.

As of 17th October 2024, LIC MF Liquid Fund manages an AUM of Rs. 11,403.17 cr. with an expense ratio of 0.16%. The fund has delivered a three-year CAGR of 6.21% and a five-year CAGR of 5.37%.

Axis Liquid Fund

Axis Liquid Fund was launched on 9th October 2009 and aims to provide high liquidity with low risk by investing in a portfolio of money market instruments and short-term debt securities. It is intended for short-term investors seeking capital safety and liquidity.

As of 17th October 2024, Axis Liquid Fund has an AUM of Rs. 25,268.68 cr. with an expense ratio of 0.15%. The fund has generated a three-year CAGR of 6.26% and a five-year CAGR of 5.36%.

Nippon India Liquid Fund

Launched on 9th December 2003, Nippon India Liquid Fund focuses on offering a highly liquid investment option by investing in money market instruments and short-term debt securities. It is ideal for investors looking to park their funds for a short duration with minimal risk.

As of 17th October 2024, Nippon India Liquid Fund has an AUM of Rs. 26,468.93 cr. and an expense ratio of 0.20%. The fund has delivered a three-year CAGR of 6.24% and a five-year CAGR of 5.36%.

How to Invest in the Top Liquid Funds in India?

Investing in liquid funds can be a straightforward process. These funds invest in liquid assets like treasury bills and commercial papers, making them ideal for short-term needs. Here are the steps to follow:

1. Select a Platform: Choose a mutual fund app, broker, or directly invest through AMCs. You can use the Tickertape Mutual Fund Screener to compare liquid mutual funds based on performance, expense ratio, and other over 50 key factors.
2. Complete KYC: Ensure your KYC is completed to begin investing in liquid funds.
3. Pick the Fund: Use tools like Tickertape to evaluate liquid fund returns and select the best liquid mutual funds based on your goals. These funds typically offer returns of around 3-5% annually, depending on the market.
4. Choose Investment Type: Invest either through a lump sum or via a SIP. Liquid funds are flexible and allow you to redeem your investments quickly, ensuring access to liquid cash.
5. Monitor Performance: You can track liquid fund returns for 1 month or longer to see how the fund performs. This is especially useful if you have short-term goals.

How to Identify the Best Liquid Funds in India?

Finding the best liquid funds requires evaluating a few key aspects:

1. Review Performance: Compare the fund’s performance over different periods, such as 1 month or 3 months. While liquid fund returns are generally stable, using the Tickertape Mutual Fund Screener can help you compare multiple options effectively.
2. Expense Ratio and Risk: Check the fund’s expense ratio as this will affect your net returns. The expense ratio is highest for liquid funds with more active management, so it’s something you can keep an eye on.
3. Credit Risk: Ensure that the fund invests in high-rated instruments to minimise credit risk. Liquid bonds in India with good credit ratings provide more security for your investment.
4. FD vs Liquid Funds Comparison: If you’re weighing liquid funds vs FD, note that liquid funds offer higher liquidity and flexibility, while fixed deposits (FDs) lock in your investment. Liquid funds are better for short-term liquidity, but FDs might be more suitable if you want fixed returns without market fluctuations.
5. Tax on Liquid Funds: Keep in mind the tax on liquid funds when redeeming your investments. If you hold the fund for less than three years, the gains are taxed as per your income slab, while long-term investments benefit from indexation.

Advantages of Investing in High Liquidity Stocks

1. Quick Access to Cash: You can easily convert high liquidity stocks into liquid cash due to frequent trading.
2. Stable Prices: Higher trading volumes help keep prices stable, reducing sudden fluctuations.
3. Lower Transaction Costs: Narrower bid-ask spreads lead to reduced costs when buying or selling.
4. Trading Flexibility: High liquidity enables quick entry and exit from positions, providing flexibility.
5. Portfolio Diversification: Liquid stocks help balance your portfolio between liquid assets and growth potential.

Risks of Investing in Liquid Mutual Funds

1. Interest Rate Risk: Rising rates can lower liquid fund returns due to the short-term debt funds they hold.
2. Credit Risk: There’s a small chance of issuer default affecting returns.
3. Lower Growth Potential: Liquid funds offer lower returns compared to equity investments.
4. Tax on Liquid Funds: Gains are taxed as STCG or LTCG, affecting post-tax returns.
5. Expense Ratio: A high expense ratio can reduce your overall earnings, especially with low yields.
6. Market Risk: Even liquid mutual funds can face risks during unfavourable economic conditions.

Who can invest in liquid funds?

The returns offered by liquid funds are higher than that of a regular savings account. If you are an Indian and have an account with an Indian bank, then you can invest in liquid funds after completing your Know Your Customer (KYC) formalities. In case you are an NRI, you can also invest in Indian liquid funds as long as you adhere to the Foreign Exchange Management Act (FEMA).

Generally, investors choose liquid funds for the short-term investment plan. Another reason to choose liquid funds is that they also offer indexation benefits. Therefore, whether or not you should invest in liquid funds depends on your financial goals and other factors! 

Factors to Consider Before Investing in Liquid Funds

Here are some crucial aspects that you must consider before investing in liquid funds in India:

Risks

Liquid funds do not experience a lot of volatility. Hence, the net asset value (NAV) of the fund remains almost steady. However, if the credit rating of any underlying security drops, then there is a possibility that the NAV can experience a drop, too. 

Returns

Regarding numbers, savings accounts in India have a return rate of ~4%. Whereas a liquid fund offers you around 4-8% returns on average. Therefore, consider the returns when you are planning to invest.

Exit load

It is critical to note that though liquid funds can be redeemed anytime, an exit load would apply if you redeem the funds within the first seven days. This would reduce the net earnings from the fund.

Expense ratio

Liquid funds charge an annual fee called an expense ratio for fund management services. This is a percentage of the total assets of the fund. Hence, this is one of the important factors to consider when choosing a liquid fund. 

Investment plan

Before investing in any instrument, make sure you have a proper investment plan. Many investors use liquid funds to create an emergency fund, offering higher liquidity while giving reasonable returns at lower risk.

Liquid funds taxation as per the Union Budget 2024-2025

Liquid mutual funds come under debt funds.

The Union Budget 2024 has introduced significant changes to the taxation of debt mutual funds. Here is a detailed breakdown of the new tax rules:

Short-Term Capital Gains (STCG)

If you sell your debt fund units within three years (36 months), the gains from these investments are considered short-term capital gains. According to the new budget, these gains will be taxed according to your income tax slab rate.

Long-Term Capital Gains (LTCG)

For debt funds held for over three years (36 months), the gains are categorized as long-term capital gains. The key points to note under the new budget are:

• Tax Rate: The tax rate for long-term capital gains on debt funds is now a flat 12.5%, regardless of the amount of gain.
• No Indexation Benefit: The benefit of indexation, which previously allowed investors to adjust the purchase price of their assets for inflation, has been removed for debt funds. This means that the entire gain from selling a debt fund after three years will be taxable at the flat rate of 12.5%.

Summary

Capital Gains Tax	Description
Short-Term Capital Gains (STCG)	If you sell your debt fund units within three years (36 months), the tax will be as per your income tax slab.
Long-Term Capital Gains (LTCG)	For debt funds held for over three years (36 months), the tax rate is now a flat 12.5% without indexation benefits.

Conclusion 

Liquid Funds are low-risk investment instruments with better returns for a short-term investment plan. Whether to invest in liquid funds depends entirely on your financial goals. However, before investing, consult your financial advisors and tailor your portfolio for risk tolerance and market volatility before investing. You can save your efforts and time by using Tickertape’s Mutual Fund Screener to find the best mutual fund based on your risk tolerance and investment preferences!

FAQs About Liquid Funds