Updated: 14 May 2022
The best performing top 10 Debt Mutual Funds in India, based on their last 1-year direct return as of 13 May 2022, is explained below. Since we have taken the last 1 year’s performance for the ranking, for ease of comparison, we have also given the annualized performance percentage for the last 1 year, 3 years, 5 years and since the launch. Long term performance of a fund is very important and taking a year of performance may not exactly provide a reasonable comparison, we have considered the last 1 year’s performance since it gives the most recent performance indication.
Which is the best debt mutual fund?
The given below are the top 10 Liquid mutual funds, as of 13 May 2022, based on the last 1 year’s performance % (all Direct Plans).
| Scheme Name | NAV Direct ₹ | Return 6 Month (%) | Return 1 Year (%) | Return 3 Year (%) | Return 5 Year (%) | Return Since Launch (%) |
| Quant Liquid Plan | 34.43 | 4.01 | 4.03 | 5.19 | 6.00 | 7.36 |
| Navi Liquid | 2,343.15 | 4.10 | 3.82 | 4.08 | 5.36 | 6.88 |
| Baroda BNP Paribas Liquid Fund | 2,462.91 | 3.62 | 3.55 | 4.31 | 5.50 | 6.92 |
| Mahindra Manulife Liquid Fund | 1,389.80 | 3.60 | 3.53 | 4.39 | 5.55 | 5.78 |
| JM Liquid Fund | 58.45 | 3.59 | 3.52 | 4.21 | 5.43 | 6.89 |
| Mirae Asset Cash Management Fund | 2,256.40 | 3.59 | 3.51 | 4.30 | 5.47 | 6.67 |
| Sundaram Liquid Fund | 1,886.68 | 3.59 | 3.51 | 4.29 | 5.26 | 5.76 |
| IDBI Liquid | 2,299.71 | 3.52 | 3.51 | 4.42 | 5.56 | 6.88 |
| UTI Liquid Cash Fund | 3,501.70 | 3.57 | 3.51 | 4.29 | 5.46 | 6.84 |
| Union Liquid | 2,059.26 | 3.57 | 3.50 | 4.32 | 4.69 | 6.41 |
The given below are the top 10 debt short duration mutual funds, as of 13 May 2022, based on the last 1 year’s performance % (all Direct Plans).
| Scheme Name | Riskometer | NAV Direct ₹ | Return 1 Year (%) | Return 3 Year (%) | Return 5 Year (%) | Return Since Launch (%) |
| BOI AXA Short Term Income Fund | Moderate | 21.57 | 17.33 | 0.80 | 2.78 | 5.96 |
| IDBI Short Term Bond | 23.90 | 10.86 | 6.74 | 7.05 | 7.87 | |
| Sundaram Short Duration Fund | Moderate | 37.89 | 10.14 | 5.05 | 5.91 | 6.93 |
| UTI Short-term Income Fund | Low to Moderate | 26.62 | 8.21 | 4.69 | 5.38 | 7.37 |
| Franklin India Short-term Income Fund | Very High | 4,675.85 | 7.54 | 3.65 | 5.72 | 7.85 |
| Aditya Birla Sun Life Short Term Fund | Moderate | 40.33 | 3.82 | 7.79 | 7.57 | 8.86 |
| ICICI Prudential Short Term Fund | Moderate | 50.91 | 3.68 | 7.89 | 7.63 | 8.63 |
| Nippon India Short-term Fund | Moderate | 45.07 | 3.50 | 7.55 | 7.21 | 8.26 |
| Axis Short Term | Low to Moderate | 26.51 | 3.38 | 7.53 | 7.42 | 8.33 |
| HDFC Short Term Debt Fund | Moderate | 26.01 | 3.21 | 7.51 | 7.36 | 8.19 |
The given below are the top 10 debt ultra short duration mutual funds, as of 13 May 2022, based on the last 1 year’s performance % (all Direct Plans).
| Scheme Name | Riskometer | NAV Direct | Return 6 Month (%) | Return 1 Year (%) | Return 3 Year (%) | Return 5 Year (%) | Return Since Launch (%) |
| Franklin India Ultra Short Bond Fund | High | 33.81 | 11.38 | 11.34 | 8.27 | 8.44 | 9.10 |
| Nippon India Ultra Short Duration Fund | Moderate | 3,536.66 | 4.21 | 8.20 | 5.11 | 5.98 | 7.14 |
| UTI Ultra Short Term Fund | Low to Moderate | 3,650.30 | 3.28 | 6.43 | 4.86 | 5.91 | 7.54 |
| ICICI Prudential Ultra Short Term Fund | Moderate | 23.96 | 3.71 | 4.14 | 6.26 | 6.95 | 8.26 |
| IDBI Ultra Short Term | 2,369.92 | 3.26 | 4.07 | 5.74 | 6.07 | 7.29 | |
| Axis Ultra Short Term Fund | Moderate | 12.49 | 3.58 | 3.84 | 5.64 | 6.23 | |
| Aditya Birla Sun Life Savings Fund | Moderate | 445.56 | 3.43 | 3.82 | 5.92 | 6.65 | 7.87 |
| WhiteOak Capital Ultra Short Term Fund | Low | 1,141.38 | 3.14 | 3.80 | 4.61 | ||
| Tata Ultra Short Term Fund | Moderate | 11.92 | 3.53 | 3.75 | 5.20 | 5.47 | |
| Mirae Asset Ultra Short Duration Fund | Low to Moderate | 1,059.64 | 3.54 | 3.67 | 3.70 |
The given below are the top 10 debt dynamic bond mutual funds, as of 13 May 2022, based on the last 1 year’s performance % (all Direct Plans).
| Scheme Name | Riskometer | Return 1 Year (%) | Return 3 Year (%) | Return 5 Year (%) | Return Since Launch |
| UTI Dynamic Bond | Moderately High | 19.01 | 8.32 | 6.05 | 8.34 |
| HDFC Dynamic Debt Fund | Moderate | 6.90 | 7.71 | 5.69 | 7.77 |
| Franklin India Dynamic Accrual Fund | Moderately High | 6.64 | 5.34 | 6.79 | 8.30 |
| IIFL Dynamic Bond | Moderate | 4.21 | 6.67 | 6.93 | 7.22 |
| Tata Dynamic Bond Fund | Low to Moderate | 4.18 | 7.15 | 6.68 | 8.68 |
| JM Dynamic Bond Fund | Low to Moderate | 3.25 | 5.53 | 6.46 | 7.68 |
| Aditya Birla Sun Life Dynamic Bond Fund | Moderately High | 3.12 | 4.76 | 4.80 | 7.30 |
| ICICI Prudential All Seasons Bond Fund | Moderate | 3.06 | 8.39 | 7.92 | 9.98 |
| PGIM India Dynamic Bond | Low to Moderate | 2.85 | 7.31 | 7.34 | 8.41 |
| Kotak Dynamic Bond Fund | Moderate | 2.84 | 7.85 | 7.85 | 8.96 |
The given below are the top 10 debt Gilt mutual funds, as of 13 May 2022, based on the last 1 year’s performance % (all Direct Plans).
| Scheme Name | Riskometer | Return 1 Year (%) | Return 3 Year (%) | Return 5 Year (%) | Return Since Launch (%) |
| ICICI Prudential Gilt Fund | Low to Moderate | 3.18 | 8.56 | 7.86 | 8.70 |
| PGIM India Gilt Fund | Low to Moderate | 2.48 | 7.22 | 6.86 | 7.80 |
| SBI Magnum Gilt Fund | Low to Moderate | 2.45 | 8.62 | 7.45 | 9.45 |
| Kotak Gilt Investment Fund | Moderate | 2.34 | 8.14 | 7.48 | 8.40 |
| DSP Government Securities Fund | Moderate | 2.33 | 8.73 | 7.83 | 8.26 |
| Kotak Gilt Investment Provident Fund and Trust Plan | Moderate | 2.32 | 8.14 | 7.48 | 8.34 |
| Edelweiss Government Securities Fund | Moderate | 2.07 | 8.90 | 8.00 | 9.08 |
| Franklin India Government Securities Fund | Moderate | 2.00 | 5.65 | 5.20 | 7.35 |
| Aditya Birla Sun Life Government Securities Fund | Moderate | 1.98 | 8.04 | 7.44 | 9.09 |
| Axis Gilt Fund | Moderate | 1.84 | 8.53 | 7.19 | 7.61 |
The given below are the top 10 debt Medium Duration mutual funds, as of 13 May 2022, based on the last 1 year’s performance % (all Direct Plans).
| Scheme Name | Riskometer Scheme | Return 1 Year (%) Direct | Return 3 Year (%) Direct | Return 5 Year (%) Direct | Return Since Launch Direct |
| Nippon India Strategic Debt Fund | High | 16.03 | -3.81 | -0.50 | 3.62 |
| Aditya Birla Sun Life Medium Term Fund | Very High | 8.20 | 5.48 | 5.61 | 8.08 |
| UTI Medium Term Fund | Moderate | 5.50 | 3.73 | 4.92 | 6.40 |
| Kotak Medium Term Fund | Moderate | 4.44 | 6.78 | 6.78 | 8.56 |
| Axis Strategic Bond Fund | Moderately High | 4.13 | 7.27 | 7.54 | 8.73 |
| ICICI Prudential Medium Term Bond Fund | Moderately High | 3.73 | 8.24 | 7.54 | 8.60 |
| HDFC Medium Term Debt Fund | Moderately High | 3.19 | 7.58 | 7.29 | 8.28 |
| Tata Medium Term Fund | Moderate | 3.14 | 2.13 | 3.58 | 6.30 |
| SBI Magnum Medium Duration Fund | Moderately High | 3.05 | 8.28 | 7.97 | 9.28 |
| L&T Resurgent India Bond Fund | Moderate | 2.78 | 7.22 | 6.61 | 7.84 |
The given below are the top 10 debt Corporate Bond mutual funds, as of 13 May 2022, based on the last 1 year’s performance % (all Direct Plans).
| Scheme Name | Riskometer | Return 1 Year (%) | Return 3 Year (%) | Return 5 Year (%) | Return Since Launch (%) |
| Nippon India Corporate Bond Fund | Moderate | 3.79 | 6.77 | 7.06 | 8.01 |
| PGIM India Corporate Bond Fund | Low to Moderate | 3.61 | 7.60 | 6.98 | 7.67 |
| ICICI Prudential Corporate Bond Fund | Low to Moderate | 3.51 | 7.46 | 7.32 | 8.31 |
| Kotak Corporate Bond Fund | Low to Moderate | 3.26 | 6.90 | 7.26 | 8.17 |
| Axis Corporate Debt Fund | Low to Moderate | 3.24 | 6.72 | 7.45 | |
| Aditya Birla Sun Life Corporate Bond Fund | Moderate | 2.94 | 7.55 | 7.46 | 8.37 |
| Franklin India Corporate Debt Fund | Low to Moderate | 2.91 | 7.01 | 7.39 | 8.68 |
| Sundaram Corporate Bond Fund | Low to Moderate | 2.89 | 7.79 | 7.28 | 7.73 |
| UTI Corporate Bond Fund | Low to Moderate | 2.84 | 7.81 | 7.86 | |
| HDFC Corporate Bond Fund | Moderate | 2.72 | 7.54 | 7.38 | 8.24 |
The given below are the top 10 debt Money Market mutual funds, as of 13 May 2022, based on the last 1 year’s performance % (all Direct Plans).
| Scheme Name | Riskometer | Return 6 Month (%) | Return 1 Year (%) | Return 3 Year (%) | Return 5 Year (%) | Return Since Launch (%) |
| PGIM India Money Market Fund | Low to Moderate | 3.72 | 3.79 | 4.34 | ||
| Tata Money Market Fund | Moderate | 3.54 | 3.77 | 5.60 | 4.84 | 6.51 |
| Nippon India Money Market Fund | Moderate | 3.67 | 3.77 | 5.45 | 6.32 | 7.33 |
| UTI Money Market Fund | Moderate | 3.54 | 3.70 | 5.40 | 6.29 | 7.32 |
| Axis Money Market Fund | Moderate | 3.44 | 3.68 | 5.27 | ||
| HDFC Money Market Fund | Moderate | 3.42 | 3.67 | 5.68 | 6.37 | 7.34 |
| Kotak Money Market Fund | Moderate | 3.54 | 3.67 | 5.24 | 6.16 | 7.25 |
| Aditya Birla Sun Life Money Manager Fund | Moderate | 3.40 | 3.67 | 5.65 | 6.47 | 7.45 |
| SBI Savings Fund | Moderate | 3.35 | 3.60 | 5.52 | 6.35 | 7.63 |
| ICICI Prudential Money Market Fund | Moderate | 3.30 | 3.57 | 5.42 | 6.26 | 7.29 |
A debt mutual fund (also known as a fixed-income fund) invests a significant portion of your money in fixed-income securities like government securities, debentures, corporate bonds and other money-market instruments. Debt funds are also referred to as Fixed Income Funds or Bond Funds.
A few major advantages of investing in debt funds are low cost structure, relatively stable returns, relatively high liquidity and reasonable safety. Debt funds are ideal for investors who aim for regular income, but are risk-averse. Debt funds are less volatile and, hence, are less risky than equity funds.
Tax efficient
Some people invest money for the prime reason of reducing their annual tax outgo through tax saving investments eligible under section 80C of the Income Tax Act. So, if tax reduction is a crucial investment goal, you can consider investing in debt mutual funds. This is because debt funds are more tax-efficient than traditional investment options like fixed deposits (FDs).
In FDs, the interest earned on the investments is taxed year in which it accrue or arise based on the income slab eligible irrespective of the maturity date being in that year or later. In case of debt funds, one need to pay tax only in the year it redeem and not before that. Also, one need to pay tax only on the redemption proceeds, even if is a partial redemption. Short Term Capital Gains (STCG) tax will be applicable if you hold your mutual fund units for less than three years and Long-Term Capital Gains (LTCG) for investments beyond three years. LTCG are eligible for indexation benefits wherein you are taxed only on the returns which are over and above the inflation rate(embedded in cost inflation index {CII}). This helps to reduce your tax outgo as well as provides better post tax returns.
High liquidity
Fixed deposits come with a specified lock-in period. If you liquidate your FD prematurely, the lender may charge you a penalty. While debt mutual funds have no lock-in periods, some of the funds carry an exit load which is a charge deducted at source for early withdrawals. The exit load period varies from fund to fund while some funds have nil exit load as well. However, debt mutual funds are liquid and you can withdraw your money from the fund on any business day.
Stability
Investing in debt funds can also increase the balance of your portfolio. Equity funds (while offering higher return potential) can be volatile. This is because the returns on equity funds are linked directly to the performance of the stock market. By investing in debt funds, you can adequately diversify your portfolio and bring down overall risk (cushion the downside)
Flexibility
Debt mutual funds also offer you the option of moving around your money to different funds. This is possible through a Systematic Transfer Plan (STP). Here, you have the option to invest a lump sum amount in debt funds and systematically transfer a small portion of the fund into equity at regular intervals. This way you can spread out the risk of equities over a specified period of a few months rather than investing the entire amount at one point. Other traditional investment options do not offer this degree of flexibility to investors.
When the government of India wants to start a new development project such as building ports to enhance imports, or a major corporate house needs short-term investment capital to expand its enterprise, they need liquidity. One of the options for the corporate or government entity is to borrow from a lender. This lender could be a financial institution such as a bank. If the borrower takes a loan from the bank, they will get their cash inflow, and once the loan tenure is complete, pay back the loan amount with interest. Another way the corporate or government undertaking can borrow money is by issuing bonds.
Debt schemes aim to generate returns for investors by investing their money in avenues like bonds and other fixed-incomesecurities basis asset allocation stated in the scheme information document. This means that these schemes buy the bondsand can earn cash flows in the form of interest on the invested amount depending on the nature of the instrument. This issimilar to how a Fixed Deposit (FD) works. When you keep a deposit in your bank, you are technically lending money to the bank. In return, the bank offers interest income on the money lent.
However, there are many more nuances to debt fund investments. For example, a particular debt fund can buy only specificsecurities of specific maturity ranges – a gilt fund should invest minimum 80% in government securities while a liquid fund invests in securities of maturity upto 91 days. Debt funds also do not offer assured returns but have market linked returns which can fluctuate. Rising interest rates can have a positive impact on yields / interest income but a negative impact on bond prices. The reverse is true when interest rates fall.
About the author
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Dileep K Nair Mr Dileep is currently the managing partner of Unifinn Capital Global and an advisor to the investment banking and corporate finance world. He is a mentor, entrepreneur and business advisor with an overall 19 years experience, 12 plus years of banking and finance experience and 7 plus years experience in investment banking and corporate finance, with relevant experience in handling private equity transactions, private debt, venture capital, angel investing, M&A, other growth capital transactions and real estate financing transactions. |
Disclaimer
The above fund values are taken from https://www.amfiindia.com/ and the same will vary every day. All the above funds are high-risk funds. The investors must check the present NAV of the fund and read the scheme documents before deciding to invest. Also, all the risk factors relating to the scheme and the fund manager must be studies before taking a decision to invest. The above analysis is just to understand the top performing equity funds from each category and not to promote any fund or fund manager/ AMC.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully. The NAVs of the schemes may go up or down depending upon the factors and forces affecting the securities market including the fluctuations in the interest rates. The past performance of the mutual funds is not necessarily indicative of future performance of the schemes. The Mutual Fund is not guaranteeing or assuring any dividend under any of the schemes and the same is subject to the availability and adequacy of distributable surplus. Investors are requested to review the prospectus carefully and obtain expert professional advice with regard to specific legal, tax and financial implications of the investment/participation in the scheme.
