3 Debt Mutual Funds: Liquid Funds

#1 Nippon India Liquid Fund

The Nippon India Liquid Fund is an open-ended liquid mutual fund scheme designed to generate optimal returns while maintaining high liquidity and moderate levels of risk. The fund is benchmarked against the NIFTY Liquid Index A-I.

Vikash Agarwal, who has over 19 years of experience, has been managing the fund since September 2024. He manages the fund alongside Kinjal Desai and Amber Singhania, who oversee its overseas investments.

As of 31 May 2026, the fund's attributes reflect its short-term, high-liquidity focus. The Asset Under Management (AUM) stood at Rs 317.52 billion (bn). The direct plan expense ratio is 0.17%.

The portfolio predominantly consists of instruments with maturities of up to 91 days. Securities include commercial paper, certificates of deposit, Treasury bills, and short-term corporate debt.

The majority of the fund is invested in Commercial Papers (55.64%) and Certificates of Deposit (34.1%).

Their short maturity profile helps limit interest-rate sensitivity and keep volatility low.

The fund allocates 15.99% to Treasury Bills and 0.06% to State Government Bonds. Because these are backed by the government, they carry a sovereign (SOV) rating, providing safety and immediate liquidity.

The fund significantly minimizes capital risk by maintaining a high-quality credit profile. Overall, 99.7% of its assets are rated AAA, Sovereign, A1+, or are held as Cash & Other Receivables, with only 0.30% remaining unrated.

It primarily invests in short-term debt instruments, with its portfolio maturing in about 48 days on average. Since its investments mature quickly, interest rate changes have a limited impact on the fund, helping keep volatility low and returns relatively stable.

The annualised portfolio Yield To Maturity (YTM) is 6.98%. This indicates the income potential of the underlying debt securities before accounting for expenses and taxes.

The fund has delivered a return of 6.72%, broadly in line with the portfolio's yield profile, outperforming both the category average (6.31%) and CRISIL Liquid Debt Index (6.45%).

#2 Axis Liquid Fund

The Axis Liquid Fund is an open-ended liquid scheme designed to invest in debt and money market instruments with maturities of up to 91 days.

Devang Shah, who has 20 years of experience, has been managing the fund since 5 November 2012. He manages the fund alongside Aditya Pagaria (17 years of experience, managing since 13 August 2016) and Sachin Jain (12 years of experience, managing since 3 July 2023).

Among the funds on this list, Axis Liquid Fund manages the largest asset base, providing investors access to a highly scaled liquid fund platform. As of 30 April 2026, the AUM stood at Rs 561.68 bn. The direct plan expense ratio is 0.14%.

It boasts a high-quality portfolio with a 100% allocation to A1+ rated assets. Moreover, 98.79% of its rating allocation is safely positioned in AAA, Sovereign (SOV), and equivalent ratings.

The portfolio is invested in Commercial Papers (53.61%) and Certificates of Deposit (31.83%), ensuring diversification across short-term debt securities.

The remainder of the portfolio allocates 11.86% to Treasury Bills, Corporate Bonds (1.37%), Zero Coupon Bonds (0.12%), and holds 1.21% in Net Current Assets.

The annualised portfolio YTM is 6.23%, with the Modified Duration, Macaulay Duration, and Residual Maturity all closely aligned at exactly 35 days.

The fund's 6.75% return closely aligns with the portfolio's YTM. As a result, it outperforms both the category average (6.31%) and CRISIL Liquid Debt Index (6.45%).

#3 Parag Parikh Liquid Fund

Parag Parikh Liquid Fund is an open-ended Liquid scheme characterised by relatively low interest-rate risk and credit risk.

The fund aims to deliver reasonable market-related returns with lower risk and high liquidity by making judicious investments in money market and debt instruments.

It's managed by Tejas Soman, Mansi Kariya, and Aishwarya Dhar, who collectively oversee its debt investment strategy.

As of 31 May 2026, the fund's AUM was Rs 54.09 bn. Fund managers and insiders have a meaningful investment (Rs 14.28 bn) in the scheme, aligning their interests with those of investors. The fund charges an expense ratio of 0.09% for the direct plan.

The portfolio is primarily invested in Certificates of Deposit (42.13%), Commercial Papers (34.1%), and Treasury Bills (19.58%). Smaller allocations are also allocated to government securities, NCDs, and other liquid instruments.

With a YTM of 6.41%, an average maturity of about 40 days, and a modified duration of 0.1 years, the portfolio remains highly liquid and relatively insulated from interest-rate movements.

From a credit quality perspective, 77.14% of the portfolio is invested in A1+/AAA-rated securities, while sovereign-rated instruments account for 20.85%, reflecting a strong focus on high-quality debt assets.

The fund's return (6.45%) over the last year closely follows the portfolio's YTM. The scheme outperforms both the category average (6.31%) and the CRISIL Liquid Debt Index (6.45%).

Bottom line

Liquid funds can be a useful option for investors seeking a modest return on short-term surplus cash without locking up their money.

The three funds discussed above combine high-quality portfolios, short maturities, and strong liquidity, helping limit interest rate and credit risks.

Their portfolios are largely invested in high-quality short-term instruments such as certificates of deposit, commercial paper, and treasury bills, helping to balance liquidity and capital preservation.

They have also outperformed both their category average and benchmark over the past year. However, investors should choose a fund based on their liquidity needs, risk appetite, and investment horizon.

However, they're neither foolproof nor risk-free. Like every financial product, liquid funds have some level of risk. Investors should assess whether the risks align with their investment objectives and liquidity needs.

Disclaimer: This write-up is for information purposes and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are unsure about your risk appetite, consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks. Read all scheme-related documents carefully. Registration granted by SEBI, Membership of BASL, and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.