Liquid funds invest in short maturity instruments like commercial papers or bonds issued by companies. The market value of these instruments is affected by changes in yields on short tenure government securities. As liquid funds are at the shortest end of the maturity spectrum, they are affected the least by interest rate fluctuations. Thus, they are considered reasonably safe.
You can opt for well rated liquid funds like Canara Robeco Liquid, HDFC Cash Management Savings, LICMF Liquid and Templeton India MMA.
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