Best Liquid Funds In India (2025): Top Picks For Safe And Quick Returns
As of May 2025, the total number of mutual fund investors in India stands at 5.49 crores, with an addition of 3.19 crores new investors1. While the US markets witnessed an 8% rise, the assets under management of Indian mutual fund houses grew at a 20% CAGR in the last 10 years2. However, there might be some investors who are reluctant to take advantage of this trend due to their risk-averse nature or need for liquidity.
For such investors, the best liquid funds can yield optimal returns whilst controlling risk and liquidity requirements. Therefore, this blog aims to list the best liquid mutual funds in India.
Liquid Fund Comparison 2025
Before getting into the list of top liquid funds in India, understanding the meaning of these funds can reveal key features.
Liquid funds invest in short-term money markets and debt securities. According to the SEBI categorisation, the maturity period of these assets held by the liquid funds should not exceed 91 days3.
The short maturity period is the key to low risk and high liquidity. Some common assets held by the best liquid funds are commercial papers, treasury bills, certificates of deposits, etc.
The table below ranks the best liquid funds in India based on their AUM as of 23 July 2025. All funds below are direct growth plans.
| Particulars | HDFC Liquid Fund | SBI Liquid Fund | ICICI Prudential Liquid Fund | Aditya Birla Sun Life Liquid Fund |
AUM (INR Crore) | 63,547.69 | 62,208.07 | 49,517.31 | 49,485.72 |
| Expense Ratio | 0.20 | 0.21 | 0.20 | 0.21 |
| 1-year return (%) | 7.15 | 7.10 | 7.16 | 7.22 |
| Standard Deviation (%) | 0.21 | 0.20 | 0.21 | 0.21 |
| Sharpe (%) | 2.30 | 2.33 | 2.34 | 2.69 |
| Sortino (%) | 2.45 | 2.46 | 2.57 | 2.98 |
| Beta (%) | 0.44 | 0.43 | 0.44 | 0.44 |
| Alpha (%) | 1.31 | 1.27 | 1.32 | 1.39 |
Source: Valuesearchonline4
Discussed below are some key takeaways from the best-performing liquid mutual funds in India. These analytical pointers can aid in formulating an optimal investment strategy.
- HDFC Liquid Fund has the highest AUM, indicating high investor confidence and stability. It is also among the lowest expense ratio liquid funds, along with the ICICI Prudential Liquid fund.
- Aditya Birla Sun Life Liquid Fund has the highest one-year return among the four best liquid funds in this list. Moreover, it also has the highest Sharpe and Sortino ratios, indicating optimal returns with the risk taken.
- The standard deviation of the SBI liquid fund is the least among its top liquid funds in India. This shows that the fund has delivered consistent performance, with less fluctuation from average returns, compared to other best liquid funds.
- All four best liquid funds listed in the table above have an average credit rating of AAA. This shows a high creditworthiness of instruments in their portfolio.
However, only comparing liquid fund AUM and returns is not enough for profitable portfolio creation. Some other analytical parameters must be considered before choosing the right liquid fund.
How To Select The Best Liquid Funds
Discussed below are some parameters that can aid in understanding how to choose liquid funds optimally.
1. Match Liquid Funds To Your Time Horizon And Goals
Investment strategies are time-bound. It means that investors undertake investments to meet certain needs. Therefore, before choosing a liquid mutual fund, investors should consider the period for which they would like to invest and then choose a fund accordingly.
For instance, suppose Mr A wants to create a fund for an upcoming trip, which he wishes to take after two years. Therefore, he decided to look for the best liquid fund with the highest two-year return and high AUM.
Now, Edelweiss Liquid Fund Direct Growth Plan has delivered the highest 2-year return historically (as of July 23), followed by Aditya Birla Sun Life Liquid Fund Direct Growth Plan5. Now, since Mr A wants his mutual fund to also have a high AUM, he might choose Aditya, because it is among the best liquid funds based on AUM.
| Name | Two-year return |
| Edelweiss Liquid Fund | 7.33% |
| Aditya Birla Sun Life Liquid Fund | 7.32% |
2. Check Returns, Costs And Risks Before You Invest
Along with considering the investment tenure, the investor should also monitor the category average and benchmark to choose the best liquid funds for short-term investment. If the fund performance in terms of returns and risk metrics is better than the benchmark or category average, it implies optimal fund performance.
The factsheet of a mutual fund usually mentions the benchmark it tracks and relevant details.
For instance, two key benchmarks mostly followed by liquid funds are the CRISIL Liquid Debt A-I Index and NIFTY Liquid Index A-I6. The table below shows the one-year annualised return of both.
| Benchmark | One-year annualised return |
| CRISIL Liquid Debt A-I Index (as of March 2025) | 7.10 (Average YTM)7 |
| NIFTY Liquid Index A-I (as of 30 June 2025) | 7.17 (One-year return)8 |
Similarly, comparison with the category is also key. Discussed below are some key category metrics that can be compared to fund-specific metrics.
| Return metrics | |||
| Years | Average | Top | Bottom |
| One-year | 6.28 | 76.30 | -0.28 |
| Two-year return | 6.53 | 47.21 | 0.00 |
| Risk-adjusted Metric | |||
| Parameter | One Year | Three Year | Five Year |
| Standard deviation | 0.3523 | 0.3717 | 0.6105 |
| Sharpe ratio | 1.2549 | 0.6864 | -0.4764 |
| Sortino Ratio | 110.5427 | 4.3557 | 0.0108 |
| Alpha | -0.4204 | -0.3042 | -0.3619 |
| Beta | 1.8928 | 1.4301 | 1.3549 |
Source: Morningstar9
However, no matter how profitable a particular investment medium might seem, over-reliance of a portfolio on an asset can increase risk.
3. Smart Diversification
Complementing liquid funds with other alternative investments can aid in optimal diversification. Discussed below are some popular instruments on Grip.
| Instrument | Minimum investment | Return | Security cover | Backed by or Rated by |
| Bonds | INR 1,000 | 9% to 14% | Yes | ICRA, CRISIL |
| High-yield FDs | INR 1,000 | 8% to 10% | Yes | Rated and backed by RBI |
| LeaseX | INR 1,00,000 | Up to 16% | Yes | SEBI regulated and rated |
| InvoiceX | INR 1,00,000 | 10% to 14% | Yes | RBI or SEBI-regulated and rated |
| LoanX | INR 1,00,000 | Up to 14% | Yes | RBI or SEBI-regulated and rated |
Conclusion
Any investment should be aligned with the unique investor's needs. Liquid mutual funds mark an optimal entry point for conservative investors or those who desire fixed returns and high liquidity. However, choosing the highest liquid fund returns in 2025 isn’t enough. Portfolio diversification through alternative investments is key too.
Grip can offer up to 14% post-tax returns through a range of assets. Don’t forget to visit Grip Invest today!
References:
1. Economic Times, accessed from: https://economictimes.indiatimes.com/mf/mf-news/indian-mutual-fund-industry-aum-grew-20-cagr-in-past-10-years-vs-8-in-us-franklin-templeton-india-mf/articleshow/121953189.cms
2. Economic Times, accessed from: https://economictimes.indiatimes.com/mf/mf-news/indian-mutual-fund-industry-aum-grew-20-cagr-in-past-10-years-vs-8-in-us-franklin-templeton-india-mf/articleshow/121953189.cms
3. SEBI, accessed from: https://www.sebi.gov.in/legal/circulars/oct-2017/categorization-and-rationalization-of-mutual-fund-schemes_36199.html
4. Value Search Online, accessed from: https://www.valueresearchonline.com/funds
5. Money control, accessed from: https://www.moneycontrol.com/mutual-funds/performance-tracker/returns/liquid-fund.html
6. AMFIIndia, accessed from: https://www.amfiindia.com/research-information/other-data/listofbenchmarkindices
7. CRISIL Indices, accessed from: https://www.crisil.com/content/dam/crisil/Indian-Consolidated-Factsheet/2024/CRISIL%20Indices%20Factsheet%203%20March%202025.pdf
8. NIFTY Indices, accessed from: https://www.niftyindices.com/Factsheet/Factsheet_NIFTY_FixedIncome_PRC_Indices.pdf
9. Morning Star, accessed from: https://www.morningstar.in/tools/mutual-fund-category-performance.aspx
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