Liquid funds are debt funds that invest in short-term assets with a maturity period of just 91 days. As per SEBI norms, liquid funds are allowed to invest only in debt and money market securities. These funds invest in fixed-income securities like treasury bills, corporate bonds, Certificates of Deposits (CODs), etc. The primary benefit of these funds is that there’s no lock-in period. You can redeem your investments upon maturity. Want to start investing in liquid funds? Here’s a list of the 20 best liquid funds with their expense ratio, NAV, AUM and returns. Read on!
Here are the best liquid funds 2023 in India that you can invest:
|Best Liquid Funds in India||Features|
|Quant Liquid Plan – Direct Plan – Growth||AUM: ₹1561.92 Crore|
Expense Ratio: 0.29%
|IDBI Liquid Fund – Direct Plan – Growth||AUM: ₹763.09 Crore|
Expense Ratio: 0.13%
|Mahindra Manulife Liquid Fund – Direct Plan – Growth||AUM: ₹514.40 Crore|
Expense Ratio: 0.15%
|Franklin India Liquid Fund – Super Institutional – Direct – Growth||AUM: ₹1511.18 Crore|
Expense Ratio: 0.21%
|Edelweiss Liquid Fund – Direct Plan – Growth||AUM: ₹1543.35 Crore|
Expense Ratio: 0.15%
|Aditya Birla Sun Life Liquid Fund – Direct Plan – Growth||AUM: ₹28071.52 Crore|
Expense Ratio: 0.21%
|Nippon India Liquid Fund – Direct Plan – Growth||AUM: ₹25358.05 Crore |
Expense Ratio: 0.2%
|PGIM India Liquid Fund – Direct Plan – Growth||AUM: ₹809.86 Crore|
Expense Ratio: 0.16%
|Baroda BNP Paribas Liquid Fund – Direct Plan – Growth||AUM: ₹6686.41 Crore |
Expense Ratio: 0.19%
|LIC MF Liquid Fund – Direct Plan – Growth||AUM: ₹5996.48 Crore |
Expense Ratio: 0.16%
|Axis Liquid Fund – Direct Plan – Growth||AUM: ₹27226 Crore|
Expense Ratio: 0.15%
|Tata Liquid Fund – Direct Plan – Growth||AUM: ₹23,211.8 crore |
Expense Ratio: 0.14%
|UTI Liquid Cash Plan – Direct Plan – Growth||AUM: ₹18212.37 Crore |
Expense Ratio: 0.21%
|Mirae Asset Cash Management Fund – Direct Plan – Growth||AUM: ₹5983.36 Crore NAV: ₹2337.50|
Expense Ratio: 0.17%
|ICICI Prudential Liquid Fund – Direct Fund – Growth||AUM: ₹47245.62 Crore |
Expense Ratio: 0.2%
|HSBC Liquid Fund – Direct Plan – Growth||AUM: ₹12043.46 Crore |
Expense Ratio: 0.12%
|DSP Liquidity Fund – Direct Plan – Growth||AUM: ₹13582.50 Crore |
Expense Ratio: 0.15%
|Bank of India Liquid Fund – Direct Plan – Growth||AUM: ₹403.08 Crore NAV: ₹2591.80|
Expense Ratio: 0.13%
|JM Liquid Fund – (Direct) – Growth||AUM: ₹1426.86 Crore |
Expense Ratio: 0.15%
|SBI Liquid Fund – Direct Plan – Growth||AUM: ₹57052.91 Crore |
Expense Ratio: 0.18%
Given below are details of the best liquid mutual funds in India in 2023:
Quant Liquid Plan is one of the best liquid funds. It was launched on January 5, 2013, and it invests 67.93% in debt, of which 66.24% is in low-risk securities and 1.69% is in government securities. This scheme is most suited for individuals who are looking for alternative investment options other than bank deposits and wish to remain invested for a short tenure. More details are given below:
This liquid scheme was officially launched on December 31, 2012, and has generated 6.80% average annual returns since its inception. IDBI Liquid Fund has a higher ability to generate more consistent returns than other funds in its category. While the minimum investment for the first time is ₹5,000, it is ₹1,000 for subsequent investments. The minimum SIP investment is ₹500. Check more details below:
Mahindra Manulife Liquid Fund is one of the top liquid funds in India that was officially launched on July 4, 2016. Since its inception, it has generated 5.78% average annual returns. The scheme invests 93.15% in debt including 66.67% in low-risk securities and 26.48% in government securities. The average maturity period of assets held by this fund is 0.12 years.
One of the best-performing liquid funds, Franklin India Liquid Fund invests 100% of its total assets in debt and money market securities. 78.74% of its debt allocation is in low-risk securities and 8.87% is in government-backed securities. The average maturity period of the debt assets held by this fund is 0.8 months. The scheme was launched on December 31, 2012, and since then, it has generated 7.13% average returns annually. Provided below are more details:
The official launch date of Edelweiss Liquid Fund is January 1, 2013, and since its introduction, it has delivered 6.73% average annual returns. The objective of the scheme is to generate reasonable returns at low risk and provide high liquidity through the money market and debt securities. This liquid fund holds the potential to deliver higher returns than its peers and the ability to minimise losses in a falling market. Check its details:
Aditya Birla Sun Life Liquid Fund is one of the best liquid funds that invests 86.9% in low-risk securities and 23.94% in government securities. Its investments include T-Bills, GOI-backed securities, commercial paper, certificates of deposits, corporate bonds and non-convertible debentures. Aditya Birla Sun Life Liquid Fund was launched on January 1, 2013, and since then, it has generated average annual returns of 6.84%. Given below are more details:
This liquid fund invests 25.42% in government securities, which are T-Bills. Its other investments include commercial papers (52.07%), certificates of deposits (27.38%) and corporate bonds & NCDs (0.3%). The scheme was officially launched on January 1, 2013, and since then, its average annual return stands at 6.82%. While it can generate consistent returns, its ability to minimise losses in a falling market is average. Check its details below:
PGIM India Liquid Fund was launched on January 1, 2013. This top liquid fund invests 98.91% in debt, including 77.99% in low-risk securities and 20.92% in government securities. As one of the best-performing liquid funds, its average return since its launch is 6.8% per annum. The average maturity period of assets held by this fund is 0.1 year. 80% of its investments have a maturity of less than a year while 20% of assets have longer maturities.
Baroda BNP Paribas Liquid Fund was officially launched on January 1, 2013, and it invests 98.27% of its portfolio in debt securities, including 83.95% in low-risk securities and 14.32% in government securities. The minimum additional investment required is ₹1,000 and the minimum SIP investment is ₹500. Given below are more details:
This liquid fund was launched on January 1, 2013. If we take a detailed look at it, we would see it invests 70.4% in low-risk securities and 17.84% in government securities. LIC MF Liquid Fund has generated 6.78% average annual returns since its launch. While the minimum additional investment required is ₹500, the minimum SIP investment required is ₹1,000.
Axis Liquid Fund is one of the best liquid mutual funds. It was launched on January 1, 2013, and since then, it has generated 6.8% average annual returns. 90.28% of its total investments are in debt instruments of which 76.18% are in low-risk securities and 14.1% in government securities. It is suitable for people looking for alternatives to bank deposits for a short-term investment.
Tata Liquid Fund was launched on January 2, 2013, and it invests 99.69% of its investment portfolio in debt, including 81.9% in low-risk securities and 17.79% in Government securities. Since it was introduced, this scheme has generated average annual returns of 6.81% per annum.
UTI Liquid Cash Plan is one of the best-performing liquid mutual funds that was launched on January 1, 2013. Since its inception, it has delivered average annual returns of 6.76%. UTI Liquid Cash Plan invests 82.55% of its total assets in low-risk securities and 8.91% in government securities, The scheme has debt holdings in the Reserve Bank of India, Reliance Retail Ventures Limited, Indian Bank, Canara Bank, etc.
Mirae Asset Cash Management Fund is one of the best liquid funds to invest. It was launched on January 6, 2013. It invests 85.49% in debt of which 71.65% is allocated for low-risk securities and 13.83% is invested in Government securities. The remaining 14.51% is held as cash or cash equivalents. Since Mirae Asset Cash Management Fund was launched in 2013, it has generated 6.61% average annual returns.
This liquid mutual fund was introduced on December 31, 2012, and it has delivered 6.78% average annual returns since its introduction. The scheme has invested 82.85% in low-risk securities and 20.31% in government securities. 80% of the scheme’s assets are placed in money market instruments, while 20% are in high-quality debt securities.
HSBC Liquid Fund was officially introduced on January 1, 2013, and invests 88.65% of its total portfolio in debt securities, of which 74.87% is allocated to low-risk securities and 13.78% to government securities. 11.35% of the total assets are held as cash or cash equivalents. Since its launch, this liquid fund has delivered 6.76% average annual returns.
DSP Liquidity Fund was launched on December 31, 2012, and invests 97.01% in debt, of which 73.15% is in low-risk securities and 23.86% is in government securities. Since its launch, it has delivered 6.76% average annual returns. This liquid mutual fund has a high credit profile which indicates that it lends to high-quality issuers.
Bank of India Liquid Fund is one of the best liquid mutual funds. It invests 87.69% in debt securities, with 74.04% invested in low-risk securities, 13.65% in government securities and 12.31% in cash or similar assets. Since this scheme was launched on January 1, 2013, it has delivered 6.78% in annual returns on average. The minimum additional investment required is ₹1,000 as is the minimum withdrawal limit.
JM liquid fund was launched on January 1, 2013, and since its inception, it has successfully delivered 6.8% average returns annually. The minimum additional investment required for this scheme is ₹1,000 and the minimum SIP investment amount required is ₹500. While the fund has a high credit profile and delivers consistent returns, its ability to minimise losses in a falling market is not so good.
SBI Liquid Fund was launched on January 1, 2013. It invests 96.78% in debt securities and the remaining 3.22% is held as cash. Of the debt securities, 64.34% is in low-risk securities while 28.55% is in government securities. The scheme’s average annual returns is 6.73%. The minimum amount required for additional investment and SIP is ₹500 each.
Here are top 5 benefits of investing in the top liquid funds:
Liquid funds are low-risk debt funds that offer steady returns and safety to the principal investment. Hence, the fund’s value remains more or less constant during market fluctuations.
Unlike other debt funds, these funds are not managed actively. Therefore, the expense ratios of the best liquid funds are well below 1%. This low-cost fund makes it possible for you to receive maximum returns.
These funds come with a flexible holding period making it easier for investors to enter or exit an investment while earning high returns. In addition, most fund houses do not charge any exit load for these funds.
Unlike most mutual funds, liquid funds’ redemption is completed within 24 hours of your request.
Investing in liquid funds generates about 4%-8% higher returns. Which is considerably higher compared to traditional bank savings. Moreover, the exit load is not as high as FDs.
Liquid funds are suitable for:
The process of investing in liquid funds is not different from other mutual funds. The offline and online procedures are detailed as follows:
Follow these steps to invest in liquid funds through offline mode:
Fill up the application form after downloading it from the official website of the fund house.
Attach the necessary documents along with the investment cheque
Submit the necessary documents along with the Application form at POA (Official Point of Acceptance) for the AMC (Asset Management Company). You can also submit it to the nearest office of a Registrar & Transfer Agent (RTA).
Given below are the steps to invest in the best liquid mutual funds in India:
Step 1: Choose a liquid fund based on your investment goals and risk profile and visit the official website of the fund house.
Step 2: Navigate to the section for mutual funds and choose a liquid fund to invest in. Click to proceed.
Step 3: Provide every necessary detail including investment tenure and amount.
Step 4: You will be redirected to complete your e-KYC. It will take only a few minutes. Make sure you have your PAN, bank account and Aadhaar details at hand. Confirm the details.
Step 5: Transfer the investment amount to initiate the transaction.
Liquid funds are short-term investment plans that serve the purpose of parking one’s excess funds for a short investment horizon. There are several liquid funds operating in the market which have the potential to generate stable returns. Here are some aspects that you should keep in mind before investing in a liquid fund:
As an investor, you should stay well-informed before taking any investment options:
Consider the expected returns from a liquid fund before choosing to invest in it. It will help you decide where to park your money and provide an estimate of the returns you will receive.
Liquid funds are managed by fund managers appointed by the fund houses. An annual fee is charged to the investors to manage funds, which is known as the expense ratio. Lower the expense ratio, the higher share of returns you will receive.
Investing in liquid funds is great for those who want to create an emergency fund. High liquidity enables the investor to redeem the returns quickly in case of an emergency.
Liquid funds are not completely risk-free. However, the NAV tends to remain stable and given the short maturity period, a change in credit ratings of the underlying securities does not impact the liquid funds to a great extent.
Just like any other mutual fund, liquid funds also have a certain degree of risk. Although the Net Asset Value (NAV) of liquid funds remains stable, the NAV can get affected if the credit ratings of the underlying securities change. However, because liquid funds have a short maturity period and invest in debt securities, the risk involved is relatively lower compared to equity funds.
The dividends you earn from liquid funds will be added to your income and taxed as per the tax rate slabs. If you are in the tax slab of 20%, you will be taxed at the rate of 20% and if you are in the 30% tax slab, you will be taxed at the rate of 30%.
When you invest in liquid funds, you will earn dividends and capital gains. Dividends are added to your annual income and taxed as per the applicable tax slab. With capital gains, taxes depend on the holding period of your liquid fund investment. Take a look at the points below to understand the taxation rules of liquid funds:
It’s a great way to start generating wealth by investing in liquid funds. This blog has provided a list of the best liquid funds in India 2023 and you can choose one based on your investment goals and risk appetite. They are less risky, good for risk-averse investors and provide higher returns compared to bank savings accounts and fixed deposits.
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No, you do not need to pay tax on dividend income from liquid mutual funds.
Both liquid funds and Fixed Deposits generate similar returns. However, the former comes without a lock-in period and does not charge a penalty for withdrawing money after 7 days of investment.
Generally, they do not have an exit load if you redeem units after 7 days of investment.
No, because liquid funds invest in high-quality securities for a short span, it does not affect its NAV.
The chances of financial losses are very less considering it invests in debt instruments for a short time.
A liquid fund is a debt mutual fund investing primarily in debt and money market instruments with residual maturity of 91 days. These schemes do not have lock-in periods. Usually, liquid funds generate higher returns than savings bank account interest rates.
Liquid funds invest in debt instruments, including Treasury Bills, Dated Government Securities, Commercial Papers, corporate bonds, etc. The interest earned by investing in these government securities determines most of the returns generated by liquid funds. When the Reserve Bank of India (RBI) cuts the repo rate, it leads to a reduction in the interest rates of Government Securities which, in turn, leads to a significant reduction in liquid fund returns.
In India, liquid mutual funds fall under the regulation of the Securities and Exchange Board of India (SEBI). These are liquid, low-cost and safe mutual funds that are designed to provide safety of the principal amount, reasonable returns and liquidity. These mutual funds are perceived as alternative investment options to short-term bank deposits.
Yes, all returns from liquid funds are taxable depending on the holding period of the mutual fund units. STCGs will be applicable if the holding period is of 36 months. It will be taxed according to the individual’s income tax slab rate. LTCGs will be applicable if the holding period exceeds 36 months and the gains will be taxed at 20% along with indexation.
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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