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Best Debt Mutual Funds 2025

Updated on March 30, 2025 , 64312 views

Best debt funds vary according to the tenor of investment of the investor. Investors need to be clear on their time horizon of investment when selecting the best Debt fund for their investment and also factor in the interest rate scenario.

For investors with a very short holding period, say for a couple of days to a month, Liquid Funds and ultra-short term funds may be relevant. When the time horizon is one to two years then short-term funds may be the desired vehicle. For longer tenors, for more than 3 years, long-term debt funds are the most preferred instruments by investors, especially during falling interest rates. Above all, debt funds have proved to be less risky than equities when looking for short-term investments, however, the volatility of long-term income funds may match that of equities.

Best Debt Funds

As debt funds invest in fixed income instruments like government securities, treasury bills, corporate Bonds, etc., they have the capacity of generating consistent and regular returns over time. However, there are many qualitative and quantitative factors that one needs understand before selecting the best debt funds to invest, viz - AUM, Average Maturity, Taxation, the credit quality of the portfolio, etc. Below we have listed the top 5 best debt funds to invest across the various categories of debt funds - Best Liquid Funds, best ultra short-term funds, best short-term funds, best long-term funds and best Gilt Funds to invest in 2025 - 2026.

Why To Invest in Debt Mutual Funds?

  • Debt funds are considered to be an ideal investment for generating regular income. For example, choosing dividend payout can be an option for regular income.

  • In debt funds, investors can withdraw required money from the investment at any point in time and can let the remaining money stay invested.

  • Since debt funds largely invest in government securities, corporate debt and other securities like treasury bills, etc., they are not affected by equity market volatility.

  • If an investor is planning to achieve short-term Financial goals or invest for short periods then debt funds can be a good option. Liquid funds, ultra short-term funds, and short-term income funds may be the desired options.

  • In debt funds, investors can generate fixed income every month by starting a Systematic Withdrawal Plan (SWP is a reverse of SIP / STP) to withdraw a fixed amount on a monthly basis. Also, you can change the amount of the SWP when required.

Risks in Debt Mutual Funds

While Investing in debt funds, investors should be cautious about two major risks associated with them- credit risk and interest risk.

Credit Risk

A credit risk arises when a company that has issued the debt instruments does not make regular payments. In such cases, it has a major impact on the fund, depending on how much portion the fund has in the portfolio. Hence, it is suggested to be in debt instruments with a rating higher credit rating. An AAA rating is considered to be the highest quality with little or negligible payment Default Risk.

Interest Risks

The interest rate risk refers to a change in the bond price due to the change in the prevailing interest rate. When the interest rate rise in the economy the bond prices fall down and vice versa. The higher the maturity of the funds’ portfolio, the more prone it is to the interest rate risk. So in a rising interest rate scenario, it is advisable to go for lower maturity debt funds. And the reverse in a falling interest rate scenario.

Debt Mutual Fund Taxation

Tax implication on debt funds is computed in the following manner-

a. Short Term Capital Gains

If the holding period of a debt investment is less than 36 months, then it is classified as a short-term investment and these are taxed as per individual's tax slab.

b. Long Term Capital Gains

If the holding period of debt investment is more than 36 months, then it is classified as a long-term investment and is taxed at 20% with an indexation benefit.

Capital Gains Investment Holding Gains Taxation
Short Term Capital Gains Less than 36 months As per individual's tax slab
Long Term Capital Gains More than 36 months 20% with indexation benefits

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Best Debt Mutual Funds in India for Investments FY 25 - 26

Top 5 Liquid Mutual Funds

Top Liquid funds with AUM/Net Assets > 10,000 Crore.

FundNAVNet Assets (Cr)Min Investment1 MO (%)3 MO (%)6 MO (%)1 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Axis Liquid Fund Growth ₹2,860.45
↑ 0.53
₹42,867 500 0.71.83.67.37.47.17%1M 9D1M 9D
Invesco India Liquid Fund Growth ₹3,531.09
↑ 0.65
₹14,276 5,000 0.71.83.67.37.47.12%1M 14D1M 14D
Aditya Birla Sun Life Liquid Fund Growth ₹413.96
↑ 0.08
₹57,091 5,000 0.71.83.67.37.37.33%1M 13D1M 13D
ICICI Prudential Liquid Fund Growth ₹380.361
↑ 0.07
₹55,112 500 0.71.83.67.37.47.22%1M 7D1M 11D
Tata Liquid Fund Growth ₹4,046.04
↑ 0.73
₹25,965 5,000 0.71.83.67.37.37.2%1M 7D1M 7D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 1 Apr 25

Top 5 Ultra Short Term Bond Mutual Funds

Top Ultra Short Bond funds with AUM/Net Assets > 1,000 Crore.

FundNAVNet Assets (Cr)Min Investment3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Aditya Birla Sun Life Savings Fund Growth ₹537.333
↑ 0.32
₹14,988 1,000 1.93.97.86.97.97.84%5M 19D7M 20D
UTI Ultra Short Term Fund Growth ₹4,164.32
↑ 2.16
₹3,385 5,000 1.83.57.26.47.27.58%4M 14D4M 22D
SBI Magnum Ultra Short Duration Fund Growth ₹5,865.37
↑ 2.97
₹11,987 5,000 1.93.67.46.67.47.53%5M 5D8M 8D
ICICI Prudential Ultra Short Term Fund Growth ₹27.1758
↑ 0.01
₹13,017 5,000 1.93.67.46.67.57.74%5M 1D7M 6D
Invesco India Ultra Short Term Fund Growth ₹2,648.89
↑ 1.38
₹1,337 5,000 1.93.77.36.47.57.5%5M 13D5M 29D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 31 Mar 25

Top and Best Floating Rate Mutual Funds

FundNAVNet Assets (Cr)Min Investment3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Aditya Birla Sun Life Floating Rate Fund - Long Term Growth ₹340.577
↑ 0.19
₹13,190 1,000 23.97.977.97.8%1Y 1M 2D2Y 1M 24D
Nippon India Floating Rate Fund Growth ₹44.1308
↑ 0.02
₹7,624 5,000 2.23.98.36.88.27.51%2Y 6M 18D3Y 6M
ICICI Prudential Floating Interest Fund Growth ₹415.18
↑ 0.20
₹7,189 5,000 1.93.77.97.288.05%1Y 4D4Y 8M 16D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 31 Mar 25

Top 5 Best Money Market Mutual Funds

FundNAVNet Assets (Cr)Min Investment3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Aditya Birla Sun Life Money Manager Fund Growth ₹363.066
↑ 0.19
₹26,752 1,000 23.97.777.87.6%6M 22D6M 22D
UTI Money Market Fund Growth ₹3,024.76
↑ 1.62
₹18,083 10,000 23.97.877.77.51%6M 1D6M 1D
ICICI Prudential Money Market Fund Growth ₹372.254
↑ 0.20
₹25,882 500 23.97.777.77.48%7M 6D7M 23D
Kotak Money Market Scheme Growth ₹4,405.96
↑ 2.33
₹27,943 5,000 23.87.777.77.57%8M 8D8M 8D
L&T Money Market Fund Growth ₹25.9057
↑ 0.01
₹2,457 10,000 23.87.56.57.57.52%7M 7D10M 20D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 31 Mar 25

Top 5 Short Term Bond Mutual Funds

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
PGIM India Short Maturity Fund Growth ₹39.3202
↓ 0.00
₹281.23.16.14.2 7.18%1Y 7M 28D1Y 11M 1D
Nippon India Short Term Fund Growth ₹51.5812
↑ 0.02
₹6,3402.348.36.487.65%2Y 9M3Y 7M 13D
Aditya Birla Sun Life Short Term Opportunities Fund Growth ₹46.543
↑ 0.02
₹8,6892.23.98.26.77.97.72%2Y 10M 13D3Y 11M 5D
ICICI Prudential Short Term Fund Growth ₹58.8276
↑ 0.03
₹20,2052.248.17.27.87.82%2Y 6M 18D4Y 7M 6D
UTI Short Term Income Fund Growth ₹31.0325
↑ 0.01
₹2,4462.13.77.86.67.97.54%2Y 6M 22D3Y 7M 24D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 29 Sep 23

Top 5 Medium to Long Term Bond Mutual Funds

Top Medium to Long Term Bond funds with AUM/Net Assets > 500 Crore.

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
SBI Magnum Income Fund Growth ₹69.3522
↑ 0.03
₹1,9052.33.48.26.88.17.58%5Y 8M 8D9Y 8M 19D
ICICI Prudential Bond Fund Growth ₹39.4633
↑ 0.01
₹2,9282.74.297.48.67.32%5Y 9M 11D11Y 7M 20D
Aditya Birla Sun Life Income Fund Growth ₹123.717
↑ 0.05
₹2,2092.63.68.66.38.47.33%6Y 7M 28D15Y 5M 5D
HDFC Income Fund Growth ₹57.2613
↑ 0.02
₹8702.63.58.56.296.91%6Y 7M 26D12Y 2M 16D
Kotak Bond Fund Growth ₹75.4602
↑ 0.02
₹2,1342.33.186.38.27%6Y 6M 4D12Y 7M 24D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 31 Mar 25

Top 5 Banking and PSU Debt Mutual Funds

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
HDFC Banking and PSU Debt Fund Growth ₹22.5143
↑ 0.01
₹5,8372.33.88.16.57.94.03%3Y 9M 14D5Y 4M 30D
UTI Banking & PSU Debt Fund Growth ₹21.42
↑ 0.01
₹8252.13.77.88.67.67.32%2Y 2M 8D2Y 6M 25D
DSP BlackRock Banking and PSU Debt Fund Growth ₹23.6112
↑ 0.01
₹3,2112.33.58.36.78.67.38%5Y 3M9Y 8M 8D
Aditya Birla Sun Life Banking & PSU Debt Fund Growth ₹358.884
↑ 0.17
₹9,5862.33.88.26.67.97.43%3Y 4M 6D4Y 8M 1D
Kotak Banking and PSU Debt fund Growth ₹63.9708
↑ 0.03
₹5,7622.23.78.16.687.39%3Y 1M 10D4Y 10M 2D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 31 Mar 25

Top 5 Credit Risk Mutual Funds

Top Credit Risk funds with AUM/Net Assets > 500 Crore.

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
SBI Credit Risk Fund Growth ₹44.6291
↑ 0.02
₹2,2552.24.18.47.38.18.73%2Y 1M 20D2Y 11M 23D
HDFC Credit Risk Debt Fund Growth ₹23.4909
↓ -0.03
₹7,25223.47.86.58.22.46%2Y 3M 29D3Y 8M 3D
L&T Credit Risk Fund Growth ₹28.4861
↑ 0.01
₹5853.24.78.76.57.28.23%2Y 2M 1D2Y 10M 10D
Kotak Credit Risk Fund Growth ₹28.6432
↑ 0.01
₹7282.13.36.45.17.18.77%2Y 4M 10D2Y 11M 19D
Nippon India Credit Risk Fund Growth ₹34.1083
↑ 0.02
₹9892.34.28.67.18.39.01%2Y 4D2Y 4M 10D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 31 Mar 25

Top 5 Dynamic Bond Mutual Funds

Top Dynamic Bond funds with AUM/Net Assets > 500 Crore.

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
UTI Dynamic Bond Fund Growth ₹30.3857
↑ 0.01
₹6262.33.48.19.28.67.09%6Y 5M 5D14Y 7M 13D
SBI Dynamic Bond Fund Growth ₹35.1274
↑ 0.01
₹3,3242.42.98.27.38.67.29%8Y 4M 24D18Y 6M 18D
Aditya Birla Sun Life Dynamic Bond Fund Growth ₹45.4989
↑ 0.02
₹1,7382.83.79.288.87.32%7Y 11M 5D15Y 3M 29D
Axis Dynamic Bond Fund Growth ₹29.0492
↑ 0.01
₹1,3602.73.58.86.68.67.13%7Y 11M 19D18Y 7M 20D
HDFC Dynamic Debt Fund Growth ₹88.3836
↑ 0.03
₹8042.53.18.46.68.58.04%7Y 9M 2D16Y 9M 4D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 31 Mar 25

Top 5 Corporate Bond Mutual Funds

Top Corporate Bond funds with AUM/Net Assets > 500 Crore.

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Aditya Birla Sun Life Corporate Bond Fund Growth ₹110.625
↑ 0.06
₹25,2932.448.778.57.48%3Y 9M 14D5Y 8M 19D
HDFC Corporate Bond Fund Growth ₹31.865
↑ 0.02
₹32,1912.33.98.66.88.64.03%3Y 9M 19D5Y 11M 12D
Nippon India Prime Debt Fund Growth ₹58.6284
↑ 0.03
₹6,4982.448.67.18.47.44%3Y 10M 6D5Y 2M 26D
Kotak Corporate Bond Fund Standard Growth ₹3,688.45
↑ 1.78
₹14,4492.33.98.56.78.37.41%2Y 9M 29D4Y 2M 8D
ICICI Prudential Corporate Bond Fund Growth ₹29.1836
↑ 0.01
₹29,2902.34.18.37.387.63%2Y 7M 28D4Y 8M 8D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 31 Mar 25

Top 5 Gilt Mutual Funds

Top GILT funds with AUM/Net Assets > 500 Crore.

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
SBI Magnum Constant Maturity Fund Growth ₹62.4521
↑ 0.02
₹1,8452.83.99.47.19.16.93%6Y 9M 25D9Y 10M 6D
SBI Magnum Gilt Fund Growth ₹65.3284
↑ 0.02
₹11,2572.93.38.97.88.97.11%9Y 11M 1D23Y 10M 28D
Nippon India Gilt Securities Fund Growth ₹37.723
↑ 0.01
₹2,1262.83.38.86.88.97.1%9Y 3M 22D20Y 10M 24D
UTI Gilt Fund Growth ₹62.0701
↑ 0.02
₹6442.83.58.87.28.96.99%9Y 8M 23D22Y 9M
Aditya Birla Sun Life Government Securities Fund Growth ₹80.6061
↑ 0.02
₹1,9922.93.38.76.79.17.08%10Y 9M25Y 11M 5D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 31 Mar 25

1. ICICI Prudential Long Term Plan

To generate income through investments in a range of debt and money market instruments of various maturities with a view to maximising income while maintaining the optimum balance of yield, safety and liquidity.

ICICI Prudential Long Term Plan is a Debt - Dynamic Bond fund was launched on 20 Jan 10. It is a fund with Moderate risk and has given a CAGR/Annualized return of 8.8% since its launch.  Ranked 1 in Dynamic Bond category.  Return for 2024 was 8.2% , 2023 was 7.6% and 2022 was 4.5% .

Below is the key information for ICICI Prudential Long Term Plan

ICICI Prudential Long Term Plan
Growth
Launch Date 20 Jan 10
NAV (31 Mar 25) ₹36.2194 ↑ 0.01   (0.04 %)
Net Assets (Cr) ₹14,049 on 15 Mar 25
Category Debt - Dynamic Bond
AMC ICICI Prudential Asset Management Company Limited
Rating
Risk Moderate
Expense Ratio 1.36
Sharpe Ratio 0.87
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 100
Exit Load 0-1 Months (0.25%),1 Months and above(NIL)
Yield to Maturity 7.82%
Effective Maturity 8 Years 11 Months 5 Days
Modified Duration 4 Years 4 Months 2 Days

Growth of 10,000 investment over the years.

DateValue
31 Mar 20₹10,000
31 Mar 21₹10,898
31 Mar 22₹11,374
31 Mar 23₹12,035
31 Mar 24₹12,989
31 Mar 25₹14,122

ICICI Prudential Long Term Plan SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹203,125.
Net Profit of ₹23,125
Invest Now

Returns for ICICI Prudential Long Term Plan

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Mar 25

DurationReturns
1 Month 1.5%
3 Month 2.5%
6 Month 4.2%
1 Year 8.7%
3 Year 7.5%
5 Year 7.1%
10 Year
15 Year
Since launch 8.8%
Historical performance (Yearly) on absolute basis
YearReturns
2024 8.2%
2023 7.6%
2022 4.5%
2021 4.3%
2020 11.8%
2019 10.2%
2018 6.2%
2017 5.1%
2016 16.9%
2015 5.7%
Fund Manager information for ICICI Prudential Long Term Plan
NameSinceTenure
Manish Banthia28 Sep 1212.43 Yr.
Nikhil Kabra22 Jan 241.11 Yr.

Data below for ICICI Prudential Long Term Plan as on 15 Mar 25

Asset Allocation
Asset ClassValue
Cash6.54%
Debt93.2%
Other0.26%
Debt Sector Allocation
SectorValue
Government55.23%
Corporate37.97%
Cash Equivalent6.54%
Credit Quality
RatingValue
AA36.8%
AAA63.2%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
7.1% Govt Stock 2034
Sovereign Bonds | -
29%₹4,010 Cr391,931,490
↓ -45,000,000
7.34% Govt Stock 2064
Sovereign Bonds | -
10%₹1,383 Cr133,212,000
↑ 20,000,000
7.93% Govt Stock 2033
Sovereign Bonds | -
5%₹688 Cr66,848,050
7.53% Govt Stock 2034
Sovereign Bonds | -
3%₹459 Cr45,460,800
Vedanta Limited
Debentures | -
3%₹399 Cr40,000
7.09% Govt Stock 2054
Sovereign Bonds | -
2%₹302 Cr30,000,000
7.12% Maharashtra SDL 2038
Sovereign Bonds | -
2%₹264 Cr26,457,100
↑ 26,457,100
7.14% Maharashtra SDL 2039
Sovereign Bonds | -
2%₹240 Cr24,000,000
↑ 24,000,000
Godrej Properties Limited
Debentures | -
1%₹201 Cr20,000
Nirma Limited
Debentures | -
1%₹200 Cr20,000

2. Aditya Birla Sun Life Corporate Bond Fund

(Erstwhile Aditya Birla Sun Life Short Term Fund)

An Open-ended income scheme with the objective to generate income and capital appreciation by investing 100% of the corpus in a diversified portfolio of debt and money market securities.

Aditya Birla Sun Life Corporate Bond Fund is a Debt - Corporate Bond fund was launched on 3 Mar 97. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 8.9% since its launch.  Ranked 1 in Corporate Bond category.  Return for 2024 was 8.5% , 2023 was 7.3% and 2022 was 4.1% .

Below is the key information for Aditya Birla Sun Life Corporate Bond Fund

Aditya Birla Sun Life Corporate Bond Fund
Growth
Launch Date 3 Mar 97
NAV (31 Mar 25) ₹110.625 ↑ 0.06   (0.05 %)
Net Assets (Cr) ₹25,293 on 28 Feb 25
Category Debt - Corporate Bond
AMC Birla Sun Life Asset Management Co Ltd
Rating
Risk Moderately Low
Expense Ratio 0.5
Sharpe Ratio 1.37
Information Ratio 0
Alpha Ratio 0
Min Investment 1,000
Min SIP Investment 100
Exit Load NIL
Yield to Maturity 7.48%
Effective Maturity 5 Years 8 Months 19 Days
Modified Duration 3 Years 9 Months 14 Days

Growth of 10,000 investment over the years.

DateValue
31 Mar 20₹10,000
31 Mar 21₹10,978
31 Mar 22₹11,525
31 Mar 23₹12,062
31 Mar 24₹13,003
31 Mar 25₹14,137

Aditya Birla Sun Life Corporate Bond Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹203,125.
Net Profit of ₹23,125
Invest Now

Returns for Aditya Birla Sun Life Corporate Bond Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Mar 25

DurationReturns
1 Month 1.3%
3 Month 2.4%
6 Month 4%
1 Year 8.7%
3 Year 7%
5 Year 7.2%
10 Year
15 Year
Since launch 8.9%
Historical performance (Yearly) on absolute basis
YearReturns
2024 8.5%
2023 7.3%
2022 4.1%
2021 4%
2020 11.9%
2019 9.6%
2018 7%
2017 6.5%
2016 10.2%
2015 8.9%
Fund Manager information for Aditya Birla Sun Life Corporate Bond Fund
NameSinceTenure
Kaustubh Gupta12 Apr 213.89 Yr.

Data below for Aditya Birla Sun Life Corporate Bond Fund as on 28 Feb 25

Asset Allocation
Asset ClassValue
Cash3.8%
Debt95.93%
Other0.27%
Debt Sector Allocation
SectorValue
Corporate60.28%
Government35.65%
Cash Equivalent3.8%
Credit Quality
RatingValue
AAA100%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
7.1% Govt Stock 2034
Sovereign Bonds | -
8%₹2,033 Cr198,661,700
7.18% Govt Stock 2033
Sovereign Bonds | -
7%₹1,751 Cr170,500,000
↓ -33,000,000
7.18% Govt Stock 2037
Sovereign Bonds | -
5%₹1,267 Cr123,324,100
↓ -30,000,000
Small Industries Development Bank Of India
Debentures | -
3%₹744 Cr74,550
↓ -2,500
Small Industries Development Bank Of India
Debentures | -
2%₹599 Cr6,000
Bajaj Housing Finance Limited
Debentures | -
2%₹555 Cr55,000
6.92% Govt Stock 2039
Sovereign Bonds | -
2%₹502 Cr49,779,000
↓ -2,500,000
Bajaj Finance Limited
Debentures | -
2%₹452 Cr45,000
National Bank For Agriculture And Rural Development
Debentures | -
2%₹411 Cr41,000
↓ -2,500
6.79% Government Of India (07/10/2034)
Sovereign Bonds | -
2%₹408 Cr40,500,000
↑ 25,500,000

3. HDFC Corporate Bond Fund

(Erstwhile HDFC Medium Term Opportunities Fund)

To generate regular income through investments in Debt/ Money Market Instruments and Government Securities with maturities not exceeding 60 months.

HDFC Corporate Bond Fund is a Debt - Corporate Bond fund was launched on 29 Jun 10. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 8.2% since its launch.  Ranked 2 in Corporate Bond category.  Return for 2024 was 8.6% , 2023 was 7.2% and 2022 was 3.3% .

Below is the key information for HDFC Corporate Bond Fund

HDFC Corporate Bond Fund
Growth
Launch Date 29 Jun 10
NAV (31 Mar 25) ₹31.865 ↑ 0.02   (0.05 %)
Net Assets (Cr) ₹32,191 on 28 Feb 25
Category Debt - Corporate Bond
AMC HDFC Asset Management Company Limited
Rating
Risk Moderately Low
Expense Ratio 0.59
Sharpe Ratio 1.41
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 300
Exit Load NIL
Yield to Maturity 4.03%
Effective Maturity 5 Years 11 Months 12 Days
Modified Duration 3 Years 9 Months 19 Days

Growth of 10,000 investment over the years.

DateValue
31 Mar 20₹10,000
31 Mar 21₹10,879
31 Mar 22₹11,405
31 Mar 23₹11,862
31 Mar 24₹12,802
31 Mar 25₹13,906

HDFC Corporate Bond Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹200,132.
Net Profit of ₹20,132
Invest Now

Returns for HDFC Corporate Bond Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Mar 25

DurationReturns
1 Month 1.3%
3 Month 2.3%
6 Month 3.9%
1 Year 8.6%
3 Year 6.8%
5 Year 6.8%
10 Year
15 Year
Since launch 8.2%
Historical performance (Yearly) on absolute basis
YearReturns
2024 8.6%
2023 7.2%
2022 3.3%
2021 3.9%
2020 11.8%
2019 10.3%
2018 6.5%
2017 6.5%
2016 10.6%
2015 8.6%
Fund Manager information for HDFC Corporate Bond Fund
NameSinceTenure
Anupam Joshi27 Oct 159.35 Yr.
Dhruv Muchhal22 Jun 231.69 Yr.

Data below for HDFC Corporate Bond Fund as on 28 Feb 25

Asset Allocation
Asset ClassValue
Cash3.2%
Debt96.52%
Other0.28%
Debt Sector Allocation
SectorValue
Corporate61.07%
Government35.46%
Cash Equivalent3.2%
Credit Quality
RatingValue
AAA100%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
7.23% Government Of India (15/04/2039)
Sovereign Bonds | -
4%₹1,293 Cr125,000,000
↓ -25,000,000
7.93% Govt Stock 2033
Sovereign Bonds | -
4%₹1,286 Cr125,000,000
6.92% Govt Stock 2039
Sovereign Bonds | -
3%₹1,008 Cr100,000,000
↓ -15,000,000
7.53% Govt Stock 2034
Sovereign Bonds | -
3%₹818 Cr81,000,000
State Bank Of India
Debentures | -
2%₹789 Cr800
HDFC Bank Limited
Debentures | -
2%₹509 Cr50,000
Bajaj Housing Finance Limited
Debentures | -
2%₹504 Cr50,000
Ncd Small Industries Development Bank Of India
Debentures | -
2%₹500 Cr50,000
LIC Housing Finance Limited
Debentures | -
2%₹500 Cr5,000
Reliance Industries Limited
Debentures | -
1%₹472 Cr4,500

4. PGIM India Credit Risk Fund

(Erstwhile DHFL Pramerica Credit Opportunities Fund)

The investment objective of the Scheme is to generate income and capital appreciation by investing predominantly in corporate debt. There can be no assurance that the investment objective of the Scheme will be realized.

PGIM India Credit Risk Fund is a Debt - Credit Risk fund was launched on 29 Sep 14. It is a fund with Moderate risk and has given a CAGR/Annualized return of 6.3% since its launch.  Ranked 2 in Credit Risk category. .

Below is the key information for PGIM India Credit Risk Fund

PGIM India Credit Risk Fund
Growth
Launch Date 29 Sep 14
NAV (21 Jan 22) ₹15.5876 ↑ 0.00   (0.01 %)
Net Assets (Cr) ₹39 on 31 Dec 21
Category Debt - Credit Risk
AMC Pramerica Asset Managers Private Limited
Rating
Risk Moderate
Expense Ratio 1.85
Sharpe Ratio 1.73
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 1,000
Exit Load 0-1 Years (1%),1 Years and above(NIL)
Yield to Maturity 5.01%
Effective Maturity 7 Months 2 Days
Modified Duration 6 Months 14 Days

Growth of 10,000 investment over the years.

DateValue
31 Mar 20₹10,000
31 Mar 21₹10,565

PGIM India Credit Risk Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹194,235.
Net Profit of ₹14,235
Invest Now

Returns for PGIM India Credit Risk Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Mar 25

DurationReturns
1 Month 0.3%
3 Month 0.6%
6 Month 4.4%
1 Year 8.4%
3 Year 3%
5 Year 4.2%
10 Year
15 Year
Since launch 6.3%
Historical performance (Yearly) on absolute basis
YearReturns
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
Fund Manager information for PGIM India Credit Risk Fund
NameSinceTenure

Data below for PGIM India Credit Risk Fund as on 31 Dec 21

Asset Allocation
Asset ClassValue
Debt Sector Allocation
SectorValue
Credit Quality
RatingValue
Top Securities Holdings / Portfolio
NameHoldingValueQuantity

5. Axis Credit Risk Fund

(Erstwhile Axis Fixed Income Opportunities Fund)

To generate stable returns by investing in debt & money market instruments across the yield curve & credit spectrum. However, there is no assurance or guarantee that the investment objective of the Scheme will be achieved. The Scheme does not assure or guarantee any returns

Axis Credit Risk Fund is a Debt - Credit Risk fund was launched on 15 Jul 14. It is a fund with Moderate risk and has given a CAGR/Annualized return of 7.1% since its launch.  Ranked 4 in Credit Risk category.  Return for 2024 was 8% , 2023 was 7% and 2022 was 4% .

Below is the key information for Axis Credit Risk Fund

Axis Credit Risk Fund
Growth
Launch Date 15 Jul 14
NAV (31 Mar 25) ₹20.8996 ↑ 0.01   (0.05 %)
Net Assets (Cr) ₹381 on 28 Feb 25
Category Debt - Credit Risk
AMC Axis Asset Management Company Limited
Rating
Risk Moderate
Expense Ratio 1.58
Sharpe Ratio 1.83
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 1,000
Exit Load 0-12 Months (1%),12 Months and above(NIL)
Yield to Maturity 8.5%
Effective Maturity 2 Years 10 Months 20 Days
Modified Duration 2 Years 3 Months

Growth of 10,000 investment over the years.

DateValue
31 Mar 20₹10,000
31 Mar 21₹10,740
31 Mar 22₹11,352
31 Mar 23₹11,875
31 Mar 24₹12,743
31 Mar 25₹13,781

Axis Credit Risk Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹200,132.
Net Profit of ₹20,132
Invest Now

Returns for Axis Credit Risk Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Mar 25

DurationReturns
1 Month 1%
3 Month 2.1%
6 Month 3.8%
1 Year 8.1%
3 Year 6.7%
5 Year 6.6%
10 Year
15 Year
Since launch 7.1%
Historical performance (Yearly) on absolute basis
YearReturns
2024 8%
2023 7%
2022 4%
2021 6%
2020 8.2%
2019 4.4%
2018 5.9%
2017 6.4%
2016 9.8%
2015 8.7%
Fund Manager information for Axis Credit Risk Fund
NameSinceTenure
Devang Shah15 Jul 1410.64 Yr.
Akhil Thakker9 Nov 213.31 Yr.

Data below for Axis Credit Risk Fund as on 28 Feb 25

Asset Allocation
Asset ClassValue
Cash5.84%
Equity0.94%
Debt92.77%
Other0.45%
Debt Sector Allocation
SectorValue
Corporate76.1%
Government16.67%
Cash Equivalent5.84%
Credit Quality
RatingValue
A16.35%
AA56.44%
AAA27.2%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
7.18% Govt Stock 2033
Sovereign Bonds | -
6%₹23 Cr2,200,000
Kohima Mariani Transmission Limited
Debentures | -
5%₹20 Cr2,000
Tata Projects Limited
Debentures | -
5%₹19 Cr1,900
7.1% Govt Stock 2034
Sovereign Bonds | -
4%₹16 Cr1,600,000
Birla Corporation Limited
Debentures | -
4%₹16 Cr230
Infopark Properties Ltd.
Debentures | -
4%₹15 Cr1,500
Nirma Limited
Debentures | -
4%₹15 Cr1,500
Aditya Birla Renewables Limited
Debentures | -
4%₹15 Cr1,500
Delhi International Airport Limited
Debentures | -
4%₹15 Cr150
Shriram Housing Finance Limited
Debentures | -
4%₹15 Cr1,500

How to Evaluate Best Debt Mutual Funds

In order to select the best debt funds you wish to invest in, it is necessary to consider some of the important parameters such as average maturity, credit quality, AUM, expense ratio, tax implication., etc. Let's have an in-depth look-

1. Average Maturity/Duration

Average maturity is an essential parameter in debt funds that is sometimes overlooked by investors, who tend to invest for a long period without considering the risks involved. Investors need to decide their debt fund investment based on its maturity period, Matching the time period of investment with the maturity period of the debt fund is a good way to ensure you don't end up taking unnecessary risk. Thus, it is advisable to know the average maturity of a debt fund, before investing, in order to aim for optimum risk returns in debt funds. Looking at the average maturity (duration is a similar factor) is important, for example, a liquid fund may have an average maturity of a couple of days to maybe a month, this would mean it is a great option for an investor who is looking to invest money for a couple of days. Similarly, if you are looking at the time frame of one-year Investment plan then, a short-term debt fund can be ideal.

2. Interest Rate Scenario

Understanding the market environment is very important in debt funds which are affected by interest rates and its fluctuations. When the interest rate rises in the economy, the bond price falls and vice-versa. Also, during the time when the interest rates rise, new bonds are issued in the market with a higher yield than the older bonds, making those older bonds of lower value. Therefore, investors are more attracted towards newer bonds in the market and also a re-pricing of older bonds takes place. In case a debt fund is having an exposure to such "older bonds" then when the interest rates rise, the NAV of the debt fund would be impacted negatively. Furthermore, as debt funds are exposed to interest rate fluctuations, it disturbs the prices of the underlying bonds in the fund portfolio. For instance, long-term debt funds are at a higher risk during times of rising interest rates. During this time making a short-term investment plan will lower your interest rate risks.

If one has good knowledge of interest rates and can monitor the same, one can even take advantage of this. In a falling interest rate market, long-term debt funds would be a good choice. However, during the times of rising interest rates then it would be wise to be in funds with shorter average maturities like short-term funds, Ultra Short Term fund or even liquid funds.

3. Current Yield or Portfolio Yield

The yield is a measure of the interest income generated by the bonds in the portfolio. Funds that invest in debt or bonds that have a higher coupon rate (or yield) would have a higher overall portfolio yield. The yield to maturity(ytm) of a debt mutual fund indicates the running yield of the fund. When comparing debt funds on the basis of YTM, one should also look at that fact that how is the extra yield being generated. Is this at the cost of as lower portfolio quality? Investing in not so good quality instruments has its own issues. You don't want to end up investing in a debt fund which has such bonds or securities that may Default later on. So, always look at the portfolio yield and balance it off with the credit quality.

How-to-select-best-debt-funds

4. Credit Quality of Portfolio

In order to invest in best debt funds, checking the credit quality of the bonds and debt securities is an essential parameter. Bonds are assigned a credit rating by various agencies based on their ability to pay the money back. A bond with AAA rating is considered to be the best credit rating and also implies a safe and secure investment. If one truly wants safety and considers this as the paramount parameter in selecting the best debt fund, then getting into a fund with very high-quality debt instruments (AAA or AA+) may be the desired option.

5. Assets Under Management (AUM)

This is the foremost parameter to consider while choosing the best debt funds. AUM is the total amount invested in a particular scheme by all investors. Since, most Mutual Funds’ total AUM is invested in debt funds, investors need to select scheme assets that have a considerable AUM. Being in a fund which has a large exposure to corporates may be risky, since their withdrawals may be large which may affect the overall fund performance.

6. Expense Ratio

An important factor to be considered in debt funds is its expense ratio. A higher expense ratio creates a larger impact on the funds’ performance. For example, liquid funds have the lowest expense ratios which are up to 50 bps (BPS is a unit to measure interest rates wherein one bps is equal to 1/100th of 1%) whereas, other debt funds could charge up to 150 bps. So to make a choice between one debt mutual fund, it is important to consider the management fee or the fund running expense.

7. Taxation Impacts

Debt funds offer the benefit of long-term capital gains (more than 3 years) with indexation benefits. And the short term capital gains (less than 3 years) is taxed at 30%.

Things to consider as an investor

1. Fund Objectives

Debt Fund aims to earn optimal returns by maintaining a diversified portfolio of various types of securities. You can expect them to perform in a predictable manner. It is because of this reason, that debt funds are popular among conservative investors.

2. Fund Types

Debt funds are further divided into various categories like liquid funds, Monthly Income Plan (MIP), fixed maturity plans (FMP), Dynamic Bond Funds, income funds, credit opportunities funds, GILT funds, short-term funds and ultra short-term funds.

3. Risks

Debt funds are basically exposed to interest rate risk, credit risk, and liquidity risk. The fund value may fluctuate due to the overall interest rate movements. There’s a risk of default in the payment of interest and principal by the issuer. Liquidity risk happens when the fund manager is unable to sell the underlying security due to lack of demand.

4. Cost

Debt funds charge an expense ratio to manage your money. Till now SEBI had mandated the upper limit of expense ratio to be 2.25% (Might change time to time with regulations.).

5. Investment Horizon

An investment of 3 months to 1 year would be ideal for liquid funds. If you have a longer horizon of say 2 to 3 years, you may go for short-term bond funds.

6. Financial Goals

Debt funds can be used to achieve a variety of goals like earning additional income or for purpose of liquidity.

How to Invest in Best Debt Funds Online?

  1. Open Free Investment Account for Lifetime at Fincash.com.

  2. Complete your Registration and KYC Process

  3. Upload Documents (PAN, Aadhaar, etc.). And, You are Ready to Invest!

    Get Started

Conclusion

Debt funds are one of the best ways to invest your money and generate income on a regular basis by choosing the relevant product matching your risk profile. So, investors looking to generate steady income or take advantage of the debt markets, can consider the above best debt funds for 2025 - 2026 and start investing!_

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.
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Amol Vyas, posted on 14 Jan 19 5:50 PM

The article is nice and informative but it could be in more simple words because lot of people have much less knowledge in such sector

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