What are Liquid Funds?

Updated on October 1, 2025 , 10095 views

Liquid funds are typically debt mutual fund that invest your money in liquid assets (very short-term Market instruments) for short periods of time (ranging from a couple of days to a few weeks). They have high liquidity, that means, one can quickly convert the assets invested in (to yield some returns) to cash. The residual maturity of liquid Mutual Funds is less than or equal to 91 days.

Further, the liquid fund returns are less volatile as they invest in short-term investment instruments like commercial papers, certificates of deposit, treasury bills etc. Liquid funds are one of the best mutual funds to invest your idle money to earn good returns in a shorter duration.

Top 10 Liquid Mutual Funds 2025 - 2026

Fund	NAV	Net Assets (Cr)	1 MO (%)	3 MO (%)	6 MO (%)	1 YR (%)	2024 (%)	Debt Yield (YTM)	Mod. Duration	Eff. Maturity
BOI AXA Liquid Fund Growth	₹3,052.18 ↑ 0.62	₹1,824	0.5	1.4	3.1	6.9	7.4	5.82%	1M 10D	1M 10D
Axis Liquid Fund Growth	₹2,950.92 ↑ 0.59	₹37,122	0.5	1.4	3.1	6.8	7.4	5.9%	1M 9D	1M 11D
Edelweiss Liquid Fund Growth	₹3,389.31 ↑ 0.66	₹10,218	0.5	1.4	3.1	6.8	7.3	5.83%	1M 10D	1M 10D
Canara Robeco Liquid Growth	₹3,190.87 ↑ 0.54	₹8,310	0.5	1.4	3	6.8	7.4	5.82%	1M 1D	1M 3D
Tata Liquid Fund Growth	₹4,173.89 ↑ 0.82	₹20,404	0.5	1.4	3	6.8	7.3	5.94%	1M 9D	1M 9D
UTI Liquid Cash Plan Growth	₹4,347.69 ↑ 0.80	₹25,037	0.5	1.4	3	6.8	7.3	5.93%	1M 6D	1M 6D
DSP Liquidity Fund Growth	₹3,783.39 ↑ 0.72	₹19,926	0.5	1.4	3	6.8	7.4	5.87%	1M 6D	1M 10D
Invesco India Liquid Fund Growth	₹3,642.44 ↑ 0.70	₹14,543	0.5	1.4	3	6.8	7.4	5.84%	1M 10D	1M 10D
Aditya Birla Sun Life Liquid Fund Growth	₹427.034 ↑ 0.08	₹49,721	0.5	1.4	3	6.8	7.3	6%	1M 2D	1M 2D
Mahindra Liquid Fund Growth	₹1,724.71 ↑ 0.27	₹1,231	0.5	1.4	3	6.8	7.4	5.93%	1M 6D	1M 8D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 3 Oct 25

Research Highlights & Commentary of 10 Funds showcased

Commentary	BOI AXA Liquid Fund	Axis Liquid Fund	Edelweiss Liquid Fund	Canara Robeco Liquid	Tata Liquid Fund	UTI Liquid Cash Plan	DSP Liquidity Fund	Invesco India Liquid Fund	Aditya Birla Sun Life Liquid Fund	Mahindra Liquid Fund
Point 1	Bottom quartile AUM (₹1,824 Cr).	Top quartile AUM (₹37,122 Cr).	Lower mid AUM (₹10,218 Cr).	Bottom quartile AUM (₹8,310 Cr).	Upper mid AUM (₹20,404 Cr).	Upper mid AUM (₹25,037 Cr).	Upper mid AUM (₹19,926 Cr).	Lower mid AUM (₹14,543 Cr).	Highest AUM (₹49,721 Cr).	Bottom quartile AUM (₹1,231 Cr).
Point 2	Established history (17+ yrs).	Established history (15+ yrs).	Established history (18+ yrs).	Established history (17+ yrs).	Oldest track record among peers (21 yrs).	Established history (21+ yrs).	Established history (19+ yrs).	Established history (18+ yrs).	Established history (21+ yrs).	Established history (9+ yrs).
Point 3	Rating: 3★ (upper mid).	Top rated.	Rating: 2★ (bottom quartile).	Rating: 3★ (lower mid).	Rating: 4★ (top quartile).	Rating: 3★ (lower mid).	Rating: 3★ (bottom quartile).	Rating: 4★ (upper mid).	Rating: 4★ (upper mid).	Not Rated.
Point 4	Risk profile: Low.	Risk profile: Low.	Risk profile: Low.	Risk profile: Low.	Risk profile: Low.	Risk profile: Low.	Risk profile: Low.	Risk profile: Low.	Risk profile: Low.	Risk profile: Low.
Point 5	1Y return: 6.85% (top quartile).	1Y return: 6.85% (top quartile).	1Y return: 6.82% (upper mid).	1Y return: 6.81% (upper mid).	1Y return: 6.81% (upper mid).	1Y return: 6.81% (lower mid).	1Y return: 6.81% (lower mid).	1Y return: 6.80% (bottom quartile).	1Y return: 6.80% (bottom quartile).	1Y return: 6.78% (bottom quartile).
Point 6	1M return: 0.48% (lower mid).	1M return: 0.49% (upper mid).	1M return: 0.49% (top quartile).	1M return: 0.49% (top quartile).	1M return: 0.48% (lower mid).	1M return: 0.49% (upper mid).	1M return: 0.48% (bottom quartile).	1M return: 0.48% (bottom quartile).	1M return: 0.49% (upper mid).	1M return: 0.48% (bottom quartile).
Point 7	Sharpe: 4.59 (top quartile).	Sharpe: 3.41 (bottom quartile).	Sharpe: 3.91 (top quartile).	Sharpe: 3.48 (lower mid).	Sharpe: 3.56 (upper mid).	Sharpe: 3.40 (bottom quartile).	Sharpe: 3.56 (lower mid).	Sharpe: 3.79 (upper mid).	Sharpe: 3.41 (bottom quartile).	Sharpe: 3.61 (upper mid).
Point 8	Information ratio: 0.74 (top quartile).	Information ratio: 0.00 (upper mid).	Information ratio: 0.00 (upper mid).	Information ratio: 0.08 (top quartile).	Information ratio: 0.00 (upper mid).	Information ratio: 0.00 (lower mid).	Information ratio: 0.00 (lower mid).	Information ratio: 0.00 (bottom quartile).	Information ratio: 0.00 (bottom quartile).	Information ratio: 0.00 (bottom quartile).
Point 9	Yield to maturity (debt): 5.82% (bottom quartile).	Yield to maturity (debt): 5.90% (upper mid).	Yield to maturity (debt): 5.83% (bottom quartile).	Yield to maturity (debt): 5.82% (bottom quartile).	Yield to maturity (debt): 5.94% (top quartile).	Yield to maturity (debt): 5.93% (upper mid).	Yield to maturity (debt): 5.87% (lower mid).	Yield to maturity (debt): 5.84% (lower mid).	Yield to maturity (debt): 6.00% (top quartile).	Yield to maturity (debt): 5.93% (upper mid).
Point 10	Modified duration: 0.11 yrs (bottom quartile).	Modified duration: 0.11 yrs (lower mid).	Modified duration: 0.11 yrs (bottom quartile).	Modified duration: 0.09 yrs (top quartile).	Modified duration: 0.11 yrs (lower mid).	Modified duration: 0.10 yrs (upper mid).	Modified duration: 0.10 yrs (upper mid).	Modified duration: 0.11 yrs (bottom quartile).	Modified duration: 0.09 yrs (top quartile).	Modified duration: 0.10 yrs (upper mid).

BOI AXA Liquid Fund

Bottom quartile AUM (₹1,824 Cr).
Established history (17+ yrs).
Rating: 3★ (upper mid).
Risk profile: Low.
1Y return: 6.85% (top quartile).
1M return: 0.48% (lower mid).
Sharpe: 4.59 (top quartile).
Information ratio: 0.74 (top quartile).
Yield to maturity (debt): 5.82% (bottom quartile).
Modified duration: 0.11 yrs (bottom quartile).

Axis Liquid Fund

Top quartile AUM (₹37,122 Cr).
Established history (15+ yrs).
Top rated.
Risk profile: Low.
1Y return: 6.85% (top quartile).
1M return: 0.49% (upper mid).
Sharpe: 3.41 (bottom quartile).
Information ratio: 0.00 (upper mid).
Yield to maturity (debt): 5.90% (upper mid).
Modified duration: 0.11 yrs (lower mid).

Edelweiss Liquid Fund

Lower mid AUM (₹10,218 Cr).
Established history (18+ yrs).
Rating: 2★ (bottom quartile).
Risk profile: Low.
1Y return: 6.82% (upper mid).
1M return: 0.49% (top quartile).
Sharpe: 3.91 (top quartile).
Information ratio: 0.00 (upper mid).
Yield to maturity (debt): 5.83% (bottom quartile).
Modified duration: 0.11 yrs (bottom quartile).

Canara Robeco Liquid

Bottom quartile AUM (₹8,310 Cr).
Established history (17+ yrs).
Rating: 3★ (lower mid).
Risk profile: Low.
1Y return: 6.81% (upper mid).
1M return: 0.49% (top quartile).
Sharpe: 3.48 (lower mid).
Information ratio: 0.08 (top quartile).
Yield to maturity (debt): 5.82% (bottom quartile).
Modified duration: 0.09 yrs (top quartile).

Tata Liquid Fund

Upper mid AUM (₹20,404 Cr).
Oldest track record among peers (21 yrs).
Rating: 4★ (top quartile).
Risk profile: Low.
1Y return: 6.81% (upper mid).
1M return: 0.48% (lower mid).
Sharpe: 3.56 (upper mid).
Information ratio: 0.00 (upper mid).
Yield to maturity (debt): 5.94% (top quartile).
Modified duration: 0.11 yrs (lower mid).

UTI Liquid Cash Plan

Upper mid AUM (₹25,037 Cr).
Established history (21+ yrs).
Rating: 3★ (lower mid).
Risk profile: Low.
1Y return: 6.81% (lower mid).
1M return: 0.49% (upper mid).
Sharpe: 3.40 (bottom quartile).
Information ratio: 0.00 (lower mid).
Yield to maturity (debt): 5.93% (upper mid).
Modified duration: 0.10 yrs (upper mid).

DSP Liquidity Fund

Upper mid AUM (₹19,926 Cr).
Established history (19+ yrs).
Rating: 3★ (bottom quartile).
Risk profile: Low.
1Y return: 6.81% (lower mid).
1M return: 0.48% (bottom quartile).
Sharpe: 3.56 (lower mid).
Information ratio: 0.00 (lower mid).
Yield to maturity (debt): 5.87% (lower mid).
Modified duration: 0.10 yrs (upper mid).

Invesco India Liquid Fund

Lower mid AUM (₹14,543 Cr).
Established history (18+ yrs).
Rating: 4★ (upper mid).
Risk profile: Low.
1Y return: 6.80% (bottom quartile).
1M return: 0.48% (bottom quartile).
Sharpe: 3.79 (upper mid).
Information ratio: 0.00 (bottom quartile).
Yield to maturity (debt): 5.84% (lower mid).
Modified duration: 0.11 yrs (bottom quartile).

Aditya Birla Sun Life Liquid Fund

Highest AUM (₹49,721 Cr).
Established history (21+ yrs).
Rating: 4★ (upper mid).
Risk profile: Low.
1Y return: 6.80% (bottom quartile).
1M return: 0.49% (upper mid).
Sharpe: 3.41 (bottom quartile).
Information ratio: 0.00 (bottom quartile).
Yield to maturity (debt): 6.00% (top quartile).
Modified duration: 0.09 yrs (top quartile).

Mahindra Liquid Fund

Bottom quartile AUM (₹1,231 Cr).
Established history (9+ yrs).
Not Rated.
Risk profile: Low.
1Y return: 6.78% (bottom quartile).
1M return: 0.48% (bottom quartile).
Sharpe: 3.61 (upper mid).
Information ratio: 0.00 (bottom quartile).
Yield to maturity (debt): 5.93% (upper mid).
Modified duration: 0.10 yrs (upper mid).

*Above is list of best Liquid funds having AUM/Net Assets above 1000 Crore. Sorted on Last 1 Year Return.

Why Should you Invest in Liquid Funds?

Generally, liquid funds offer various benefits. Some of the major ones are listed below.

Liquid Fund Returns are Good

Being invested for a short duration, these funds are one of the best investment instruments to avail high Inflation benefits. Typically, during high inflation period, RBI keeps the rate of inflation high and reduces liquidity. This helps the liquid funds to earn good returns.

Liquid Investments are Less Risky

The maturity of liquid investments is 91 days, so it is very less risky. Also, some of the portfolios of these investments have a very low maturity, sometimes as low as six or eight days. So, being a short-term investment, these funds are not traded in the market but are Held-to-Maturity by the fund.

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No Lock-in Period of Liquid Mutual Funds is Low

The liquid mutual funds have no lock-in period, which means that you can withdraw your money anytime you want. Once you request for withdrawal, the money can be received within 24 hours.

Liquid Funds Taxation

Though liquid funds returns might seem tax-free in the hands of investors, an additional Dividend Distribution Tax (DDT) is paid by the Fund House. So, the returns are not totally tax-free.

Convenience of Selecting Best Liquid Funds

There are various Investing options available to invest in liquid mutual funds. These include growth plans, monthly dividend plans, weekly dividend plans and daily dividend plans. Therefore, the investors have an option to choose a plan according to their convenience and liquidity needs.

No Exit Load Offered By Liquid Funds

Lastly, there are no entry and exit loads applicable on liquid funds.

Conclusion

When planning to invest idle money to earn better returns liquid funds are a good option. Generally, anyone having idle cash in their Savings Account must have thought of investing it somewhere to make more money out of it. But the desire of having our money available whenever we need it retains us from making such investments. If you are struggling with the same problem, we have a solution for you. Invest in liquid mutual funds and let your money grow to save better!

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.