Summary
Liquid investments are designed for short-term cash management and are suitable for idle money with high liquidity.
Axis Liquid Fund has the highest AUM of ₹56,437.80 cr, and LIC MF Liquid Fund has the highest NAV of ₹5,131.15 cr among the selected funds.
The major benefits of liquid funds are high liquidity, short-term investment flexibility, and relatively lower interest rate risk.
Liquid mutual funds invest in various money market and debt securities, including government securities, AAA-rated instruments, and other money market securities. The main focus of these funds is short-term cash management. It is suitable for investors with surplus money to invest for a short period, mostly with a residual maturity of up to 91 days.
Best 10 Liquid Mutual Funds: Quick Comparison
Liquid mutual funds are funds primarily investing in debt and money market instruments, such as government bonds, corporate bonds, and treasury bills. The best Liquid mutual funds in India as of 14th August 2026 are listed below. The list below includes the best liquid funds, based on their NAV, AUM, expense ratio, and returns.
| Name | NAV (as of 13 August 2026) | AUM (In ₹ Crores) | Expense Ratio (%) | 1 year Returns (%) | 3 years Returns (%) | 5 years Returns (%) | Benchmark |
| LIC MF Liquid Fund | 5131.15 | 16,809.21 | 0.13 | 6.44 | 6.97 | 6.28 | CRISIL Liquid Debt A-I Index |
| Baroda BNP Paribas Liquid Fund | 3257.18 | 12,206.26 | 0.12 | 6.4 | 6.95 | 6.3 | CRISIL Liquid Debt A-I Index |
| Mahindra Manulife Liquid Fund | 1841.09 | 1,279.86 | 0.13 | 6.46 | 7.01 | 6.33 | CRISIL Liquid Debt A-I Index |
| Union Liquid Fund | 2726.38 | 7,564.22 | 0.06 | 6.46 | 7 | 6.32 | CRISIL Liquid Debt A-I Index |
| Canara Robeco Liquid Fund | 3387.36 | 6,792.25 | 0.07 | 6.43 | 6.99 | 6.29 | CRISIL Liquid Debt A-I Index |
| Mirae Asset Liquid Fund | 2983.60 | 13,190.24 | 0.08 | 6.37 | 6.98 | 6.29 | Nifty Liquid Index A-I |
| Axis Liquid Fund | 3145.41 | 56,437.80 | 0.11 | 6.52 | 7.03 | 6.34 | Nifty Liquid Index A-I |
| 360 ONE Liquid Fund | 2163.02 | 1,153.18 | 0.2 | 6.22 | 6.78 | 6.11 | CRISIL Liquid Debt A-I Index |
| JioBlackRock Liquid Fund | 1071.99 | 10,937.16 | 0.09 | 6.51 | _ | _ | Nifty Liquid Index A-I |
| PGIM India Liquid Fund | 368.89 | 786.72 | 0.11 | 6.49 | 7.02 | 6.33 | CRISIL Liquid Debt A-I Index |
Top 10 Liquid Mutual Funds
Liquid funds are for short-term cash management, allowing investors to invest idle money for a short duration. Let’s understand the best liquid mutual funds of India, including their strength, weaknesses, and specialities.
LIC MF Liquid Fund
LIC MF Liquid Fund is a short-term debt fund that invests in liquid and money market instruments. The fund’s portfolio has historically maintained exposure to highly rated sovereign instruments. It is suitable for conservative investors seeking liquidity and portfolio quality. It has an AUM of ₹16,809.29 cr with an expense ratio of 0.13%.
Baroda BNP Paribas Liquid Fund
Baroda BNP Paribas Liquid Fund is one of the longest-running funds, having operated since 2002. It is an established fund that focuses on debt and money market instruments. The fund has an AUM of ₹12,206.26 cr with an expense ratio of 0.12%. The fund has recorded a 3-year return of 6.95%, but it also includes moderate credit risk. Therefore, investors must evaluate the portfolio and avoid treating it like a deposit.
Mahindra Manulife Liquid Fund
Mahindra Manulife Liquid Fund mostly focuses on market-linked returns with lower risk and higher liquidity. Its fund portfolio can include certificates of deposit, commercial paper, and other short-term instruments, with a residual maturity of up to 91 days. It has an asset size of ₹1,279.86 cr with an expense ratio of 0.13%. It acts as a tool for managing idle cash and treasury requirements.
Union Liquid Fund
Union Liquid Fund is a fund with a relatively short maturity. It focuses on short-term debt and money market securities, including A1+ commercial paper, AAA-rated corporate debt, and sovereign securities. The fund maintains a diversified and balanced portfolio combining sovereign and corporate securities. It has an AUM of ₹7,564.22 cr and the lowest expense ratio of 0.06% amongst the listed funds.
Canara Robeco Liquid Fund
Canara Robeco Liquid Fund is an established fund, having been operated since 2002. It focuses on money market instruments with high liquidity, and a residual maturity period of up to 91 days. Since it invests for a short period, the returns can be relatively lower. However, it recorded a 3-year return of 6.99% and a 5-year return of 6.29% with an expense ratio of 0.07%.
Mirae Asset Liquid Fund
Mirae Asset Liquid Fund primarily invests in high-liquidity debt and money market instruments, focusing on stable short-term returns. It has an AUM of ₹13,190.24 cr and an expense ratio os 0.08%. The fund has recorded a 3-year return of 6.98% and a 5-year return of 6.29%.
Axis Liquid Fund
Axis Liquid Fund has the largest AUM of ₹56,437.80 cr and invests in debt and money market securities with short maturities. It is an option to invest idle cash and manage short-term liquidity. The fund has a strong cash-management system that includes an Insta Redemption facility under certain conditions. It delivered a 3-year return of 7.03% with an expense ratio of 0.11%.
360 ONE Liquid Fund
360 ONE Liquid Fund focuses on short-term investments with liquidity, providing both Growth and IDCW policies that allow investors to choose their distributions. The fund has the highest expense ratio of 0.2% amongst the listed funds and an AUM of ₹1,153.18 cr.
JioBlackRock Liquid Fund
JioBlackRock Liquid Fund is a new fund that has been operating since 2025. The fund is designed for short-term investments, primarily focusing on liquidity, stability, and emergency use. Although it is a new entrant, it has an AUM of ₹10,937.16 cr with a relatively low expense ratio of 0.09%.
PGIM India Liquid Fund
PGIM India Liquid Fund focuses on high-quality debt and money market securities, with residual maturity up to 91 days. It maintains a high-quality portfolio, making it suitable for investors seeking short-term liquidity with lower credit risk. It has the lowest AUM of ₹786.72 cr with an expense ratio of 0.11%.
How We Selected These Liquid Funds?
The liquid mutual funds were selected based on qualitative and quantitative factors suitable for a wide range of investors.
- Maturity period: Liquid funds invest in securities that are mostly limited to a period of 91 days. The efficiency and consistency of the fund’s performance are considered within the defined period to maintain a low interest rate risk.
- Portfolio quality: It defines the selection and allocation into securities, including high-quality corporate securities, government securities, and other money market instruments.
- Liquidity management: It mentions the fund’s liquidity policy and redemption without unnecessary portfolio pressure. It includes high-liquidity securities and short-term cash management.
- Credit Risk: It considers the degree of credit risk associated with different securities. Funds with low credit risk are preferred for their efficiency.
Liquid Funds vs Other Funds Category
The table below shows how liquid mutual funds differ from other mutual funds.
| Basis | Liquid Funds | Overnight Funds | Money Market Funds |
| Primary Objective | Investing surplus cash for a short period while maintaining liquidity | Investing for a very short period without maturity risk | Investing in short-term money market instruments for generating income |
| Portfolio Maturity | Securities with a maturity period of up to 91 days | Securities with a maturity of 1 day | Money market securities with a maturity of 1 year |
| Interest rate risk | Low | Very low | Relatively higher |
| Return potential | Moderate returns | Relatively lower | Relatively higher because of longer maturity exposure |
Benefits and Risks of Liquid Mutual Funds
The benefits of liquid mutual funds are listed below.
- Short-term Investment: Liquid funds are useful for investing surplus funds in the short term rather than keeping them idle in a savings account.
- Lower Interest Rate Risk: Since the maturity of liquid funds is up to 91 days, they are less affected by interest rate fluctuations.
- High Liquidity: The funds maintain a portfolio including high-liquidity debt and money market securities, enabling investors to redeem when required.
The risks associated with liquid mutual funds are listed below.
- No Guaranteed Returns: Although the funds invest in debt securities, the returns depend heavily on the market performance of the securities and the fund’s NAV.
- Credit Risk: Since most funds invest in corporate instruments and certificates of deposit, any default by the issuer may impact the fund’s overall NAV
- Liquidity During Market Stress: During market declines, selling or redeeming investments may become difficult due to the lower value of the fund.
Who Should Consider And Avoid Liquid Mutual Funds?
Investors who should consider investing in liquid mutual funds are given below.
- Individuals with idle money and who aim to invest in mutual funds for a short period can invest in liquid funds.
- Investors with a low risk tolerance and who prefer redemption over a short maturity period can choose to invest in liquid funds.
- Investors who prefer to transfer funds to stock funds through a Systematic Transfer Plan (STP) can invest in these funds.
Investors who should avoid investing in liquid mutual funds are listed below.
- Investors with a long-term investment horizon seeking wealth creation may avoid investing in liquid funds.
- Investors with a high risk tolerance who aim to beat inflation by investing in high-return stocks can avoid these funds.
- Investors who prefer only government-backed securities can avoid these funds, since liquid funds also include other money market instruments.
How To Choose A Liquid Mutual Fund?
Investors can choose a suitable fund by evaluating the fund’s necessary fundamentals and matching them with their investment goals.
- Investment Horizon: Investors must understand the duration of the fund scheme and align their investment goals with it. Many liquid funds include debt and money market instruments with short durations, mostly with a residual maturity up to 91 days.
- Credit Quality: Investors must evaluate the credit quality of the funds, including the proportion of the fund allocated across multiple securities, such as treasury bills, government securities, certificates of deposit, etc.
- Expense fees: Investors should consider the charges associated with the fund for maintaining and managing its functions, since it is directly related to net returns.
- Fund manager: Investors must evaluate the fund manager’s past records because they are responsible for the selection and allocation of the funds. The fund manager’s capabilities can make an investment efficient.
- Risk and returns: Evaluate the fund’s risk profile from the official document and also analyse past performance results. Align your risk tolerance with the fund’s risk profile.
SIP vs Lump Sum For Liquid Funds
Investors can choose to invest in liquid funds through both SIPs and Lump sums. Let’s understand which is more suitable for investors.
| Basis | SIPs | Lump sum |
| Meaning | Investing a fixed amount at regular intervals | Investing a large amount of capital at once |
| Suitable for | These are suitable for beginners and investors with regular incomes | These are best suited for investors with surplus money available |
| Risk | Relatively lower risk because of rupee cost averaging | Higher tax-saving market risk since it is exposed to the market |
| Returns | Steady returns over time, but might be lower in a steadily rising market | May generate high returns if invested during favourable prices |
Direct vs Regular Liquid Funds
Let’s understand the difference between direct and regular liquid funds.
| Basis | Direct Liquid Funds | Regular Liquid Funds |
| Meaning | Directly purchasing from AMCs without any involvement of intermediaries | Purchased through brokerage platforms, banks, or distributors |
| Returns | Relatively higher returns due to lower cost | Relatively lower returns because of certain fees and charges |
| Suitable for | Investors comfortable with independent decision-making and investment management | Investors who seek expert guidance |
| Cost | Low investment cost because of no intermediaries | High cost because it involves distributors and intermediaries |
Taxation of Liquid Mutual Funds
Liquid mutual funds invest in debt and money market instruments, including corporate bonds, treasury bills, and government securities. The taxation of these funds is treated as capital gains on specified mutual funds, acquired on or after April 1, 2023. Any capital gains arising from the redemption of liquid mutual funds under specified funds are referred to as short-term capital gains, irrespective of their holding period and are taxed as per the applicable income tax slab.
FAQs
Based on the 1-year returns in the comparison, Axis Liquid Fund, JioBlackRock Liquid Fund, PGIM India Liquid Fund, Mahindra Manulife Liquid Fund and Union Liquid Fund are among the stronger performers in the listed group as of August 14, 2026.
Liquid funds can be considered when you want to park surplus money for a short period while retaining relatively high liquidity. However, they are market-linked and do not provide guaranteed returns.
From the listed funds, Axis Liquid Fund recorded the highest 1-year and 3-year returns among the listed funds, at 6.52% and 7.03%, respectively.
Compare the fund’s investment horizon, credit quality, expense ratio, fund manager, liquidity, risk profile and historical performance before investing.
They may suit investors with surplus or idle money who want short-term investment exposure, investors with relatively low risk tolerance, and those planning to use an STP to move money into equity funds.
Among the funds listed in the blog, Axis Liquid Fund delivered the highest 1-year return of 6.52%, followed by JioBlackRock Liquid Fund at 6.51%.
No. Liquid funds are not risk-free or guaranteed-return investments. They can face credit risk and liquidity risk, and their NAV can be affected if an issuer defaults or market liquidity deteriorates.
Liquid funds can be considered when the objective is short-term parking of surplus cash, rather than long-term wealth creation. Investors should assess their own time horizon and liquidity requirements before investing.
Neither is universally better. Liquid funds offer market-linked returns and flexible access to money, while FDs provide a predetermined interest rate. The appropriate choice depends on the investor’s liquidity requirement, risk tolerance, investment period and post-tax returns.
