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6 Best Debt Mutual Funds for Lump sum Investments 2023
Debt Mutual Fund schemes in India have grown over the years. As a result, the best performing mutual debt funds in the Market keep on changing. There are various rating systems in place to judge a mutual fund scheme, namely CRISIL, Morning Star, ICRA. These systems evaluate a mutual fund in terms of returns, Standard Deviation, credit quality of securities, rate movement guidance by RBI, etc.
Why To Invest Lump Sum in Debt Mutual Funds?
- Better return than prevailing Fixed Deposit (FD) & Recurring deposit (RD) rates across banks
- Returns are linked to debt markets
- Immediate (T+1) Redemption online
- Indexation (Debt Taxation benefits) benefits on returns over three years
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Best Lumpsum Debt Mutual Funds FY 23 - 24
Below are the top ranked funds from Debt Categories primarily funds having AUM > 500 Crore & are in Ultra-short, Corporate bond, Credit Risk, Low Duration sub categories && Having maturity of less than 3 years and providing highest yields.
Top 6 Lump sum Debt Mutual Funds
Fund NAV Net Assets (Cr) Min Investment 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2022 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Nippon India Credit Risk Fund Growth ₹30.0359
↑ 0.01 ₹1,019 500 1.7 4.4 7.2 8.9 3.9 8.97% 1Y 10M 28D 2Y 2M 19D ICICI Prudential Regular Savings Fund Growth ₹27.2348
↓ 0.00 ₹7,654 10,000 1.6 3.9 6.5 6.5 5.1 8.49% 1Y 3M 11D 3Y HDFC Credit Risk Debt Fund Growth ₹20.8335
↑ 0.00 ₹8,492 5,000 1.2 3.6 6.2 6.7 3.7 8.47% 2Y 7D 2Y 7M 18D Axis Credit Risk Fund Growth ₹18.5058
↑ 0.00 ₹529 5,000 1.3 3.6 6.4 6 4 8.44% 1Y 8M 16D 2Y 22D Aditya Birla Sun Life Credit Risk Fund Growth ₹17.9365
↑ 0.00 ₹1,017 1,000 1.4 3.6 6.6 7.5 7.1 8.15% 1Y 6M 18D 1Y 11M 8D ICICI Prudential Savings Fund Growth ₹472.283
↑ 0.11 ₹21,607 500 2 4.1 7.8 5.4 4.5 7.81% 8M 26D 2Y 11M 19D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 22 Aug 23
(Erstwhile Reliance Regular Savings Fund - Debt Plan) The primary investment objective of this option is to generate optimal returns consistent with moderate level of risk. This income may be complemented by capital appreciation of the portfolio. Accordingly investments shall predominantly be made in Debt & Money Market Instruments. Nippon India Credit Risk Fund is a Debt - Credit Risk fund was launched on 8 Jun 05. It is a fund with Moderate risk and has given a Below is the key information for Nippon India Credit Risk Fund Returns up to 1 year are on The fund’s objective is to provide reasonable returns, by maintaining an optimum balance of safety, liquidity and yield, through investments in a basket of debt and money market instruments with a view to delivering consistent performance. However, there can be no assurance that the investment objective of the Scheme will be realized. ICICI Prudential Regular Savings Fund is a Debt - Credit Risk fund was launched on 3 Dec 10. It is a fund with Moderate risk and has given a Below is the key information for ICICI Prudential Regular Savings Fund Returns up to 1 year are on (Erstwhile HDFC Corporate Debt Opportunities Fund) To generate regular income and capital appreciation by investing predominantly in corporate debt. HDFC Credit Risk Debt Fund is a Debt - Credit Risk fund was launched on 25 Mar 14. It is a fund with Moderate risk and has given a Below is the key information for HDFC Credit Risk Debt Fund Returns up to 1 year are on (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 Below is the key information for Axis Credit Risk Fund Returns up to 1 year are on (Erstwhile Aditya Birla Sun Life Corporate Bond Fund) The investment objective of the Scheme is to generate returns by predominantly investing in a portfolio of corporate debt securities with short to medium term maturities across the credit spectrum within the investment grade. The Scheme does not guarantee/indicate any returns. There can be no assurance that the schemes’ objectives will be achieved. Aditya Birla Sun Life Credit Risk Fund is a Debt - Credit Risk fund was launched on 17 Apr 15. It is a fund with Moderate risk and has given a Below is the key information for Aditya Birla Sun Life Credit Risk Fund Returns up to 1 year are on (Erstwhile ICICI Prudential Flexible Income Plan) To generate income through investments in a range of debt instruments and money market instruments of various maturities with a view to maximizing income while maintaining the optimum balance of yield, safety and liquidity. ICICI Prudential Savings Fund is a Debt - Low Duration fund was launched on 27 Sep 02. It is a fund with Moderately Low risk and has given a Below is the key information for ICICI Prudential Savings Fund Returns up to 1 year are on 1. Nippon India Credit Risk Fund
CAGR/Annualized return of 6.2% since its launch. Ranked 21 in Credit Risk category. Return for 2022 was 3.9% , 2021 was 13.5% and 2020 was -5.9% . Nippon India Credit Risk Fund
Growth Launch Date 8 Jun 05 NAV (22 Aug 23) ₹30.0359 ↑ 0.01 (0.02 %) Net Assets (Cr) ₹1,019 on 31 Jul 23 Category Debt - Credit Risk AMC Nippon Life Asset Management Ltd. Rating ☆☆ Risk Moderate Expense Ratio 1.64 Sharpe Ratio 1.06 Information Ratio 0 Alpha Ratio 0 Min Investment 500 Min SIP Investment 100 Exit Load 0-12 Months (1%),12 Months and above(NIL) Yield to Maturity 8.97% Effective Maturity 2 Years 2 Months 19 Days Modified Duration 1 Year 10 Months 28 Days Growth of 10,000 investment over the years.
Date Value 31 Aug 18 ₹10,000 31 Aug 19 ₹10,296 31 Aug 20 ₹9,438 31 Aug 21 ₹10,923 31 Aug 22 ₹11,355 31 Aug 23 ₹12,196 Returns for Nippon India Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 22 Aug 23 Duration Returns 1 Month 0.5% 3 Month 1.7% 6 Month 4.4% 1 Year 7.2% 3 Year 8.9% 5 Year 4% 10 Year 15 Year Since launch 6.2% Historical performance (Yearly) on absolute basis
Year Returns 2022 3.9% 2021 13.5% 2020 -5.9% 2019 1.9% 2018 6.1% 2017 7% 2016 10% 2015 8.8% 2014 11% 2013 8% Fund Manager information for Nippon India Credit Risk Fund
Name Since Tenure Kinjal Desai 25 May 18 5.27 Yr. Sushil Budhia 1 Feb 20 3.58 Yr. Akshay Sharma 1 Dec 22 0.75 Yr. Data below for Nippon India Credit Risk Fund as on 31 Jul 23
Asset Allocation
Asset Class Value Cash 11.29% Debt 88.71% Debt Sector Allocation
Sector Value Corporate 76.25% Government 12.46% Cash Equivalent 11.29% Credit Quality
Rating Value A 24.03% AA 37.62% AAA 38.34% Top Securities Holdings / Portfolio
Name Holding Value Quantity Summit Digitel Infrastructure Limited
Debentures | -6% ₹60 Cr 620 JSW Steel Limited
Debentures | -5% ₹55 Cr 550 7.06% Govt Stock 2028
Sovereign Bonds | -5% ₹50 Cr 5,000,000
↑ 5,000,000 Piramal Capital & Housing Finance Limited
Debentures | -5% ₹50 Cr 624,377 Greenlam Industries Limited
Debentures | -4% ₹44 Cr 450 Shriram Housing Finance Limited
Debentures | -4% ₹40 Cr 400 Lodha Developers Private Limited
Debentures | -4% ₹40 Cr 400 Grasim Industries Limited
Debentures | -3% ₹35 Cr 350 Renew Services Private Limited
Debentures | -3% ₹34 Cr 3,400 U.P. Power Corporation Limited
Debentures | -3% ₹30 Cr 300 2. ICICI Prudential Regular Savings Fund
CAGR/Annualized return of 8.2% since its launch. Ranked 26 in Credit Risk category. Return for 2022 was 5.1% , 2021 was 6.2% and 2020 was 9.8% . ICICI Prudential Regular Savings Fund
Growth Launch Date 3 Dec 10 NAV (22 Aug 23) ₹27.2348 ↓ 0.00 (-0.01 %) Net Assets (Cr) ₹7,654 on 31 Jul 23 Category Debt - Credit Risk AMC ICICI Prudential Asset Management Company Limited Rating ☆ Risk Moderate Expense Ratio 1.54 Sharpe Ratio 0.25 Information Ratio 0 Alpha Ratio 0 Min Investment 10,000 Min SIP Investment 100 Exit Load 0-1 Years (1%),1 Years and above(NIL) Yield to Maturity 8.49% Effective Maturity 3 Years Modified Duration 1 Year 3 Months 11 Days Growth of 10,000 investment over the years.
Date Value 31 Aug 18 ₹10,000 31 Aug 19 ₹10,813 31 Aug 20 ₹11,856 31 Aug 21 ₹12,860 31 Aug 22 ₹13,479 31 Aug 23 ₹14,358 Returns for ICICI Prudential Regular Savings Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 22 Aug 23 Duration Returns 1 Month 0.4% 3 Month 1.6% 6 Month 3.9% 1 Year 6.5% 3 Year 6.5% 5 Year 7.5% 10 Year 15 Year Since launch 8.2% Historical performance (Yearly) on absolute basis
Year Returns 2022 5.1% 2021 6.2% 2020 9.8% 2019 9.5% 2018 6.6% 2017 6.8% 2016 9.5% 2015 9% 2014 11% 2013 7.5% Fund Manager information for ICICI Prudential Regular Savings Fund
Name Since Tenure Manish Banthia 7 Nov 16 6.82 Yr. Ritesh Lunawat 1 May 23 0.34 Yr. Sharmila D’mello 1 May 23 0.34 Yr. Data below for ICICI Prudential Regular Savings Fund as on 31 Jul 23
Asset Allocation
Asset Class Value Cash 22.85% Equity 1.12% Debt 76.02% Debt Sector Allocation
Sector Value Corporate 57% Cash Equivalent 20.3% Government 17.64% Securitized 3.93% Credit Quality
Rating Value A 13.57% AA 50.46% AAA 35.97% Top Securities Holdings / Portfolio
Name Holding Value Quantity 7.26% Govt Stock 2033
Sovereign Bonds | -5% ₹413 Cr 41,000,000 7.38% Govt Stock 2027
Sovereign Bonds | -5% ₹385 Cr 38,250,000 Embassy Office Parks Reit
Unlisted bonds | -3% ₹251 Cr 8,209,102 07.18 Goi 2037
Sovereign Bonds | -3% ₹199 Cr 20,000,000 Ongc Petro Additions Limited
Debentures | -3% ₹197 Cr 2,000 Aadhar Housing Finance Ltd
Debentures | -2% ₹175 Cr 17,500
↑ 17,500 The Great Eastern Shipping Company Limited
Debentures | -2% ₹174 Cr 1,743 182 DTB 22092023
Sovereign Bonds | -2% ₹149 Cr 15,000,000 7.06% Govt Stock 2028
Sovereign Bonds | -2% ₹149 Cr 15,000,000 Ess Kay Fincorp Limited
Debentures | -2% ₹126 Cr 1,250 3. HDFC Credit Risk Debt Fund
CAGR/Annualized return of 8.1% since its launch. Ranked 9 in Credit Risk category. Return for 2022 was 3.7% , 2021 was 7% and 2020 was 10.9% . HDFC Credit Risk Debt Fund
Growth Launch Date 25 Mar 14 NAV (22 Aug 23) ₹20.8335 ↑ 0.00 (0.02 %) Net Assets (Cr) ₹8,492 on 31 Jul 23 Category Debt - Credit Risk AMC HDFC Asset Management Company Limited Rating ☆☆☆☆ Risk Moderate Expense Ratio 1.53 Sharpe Ratio 0.14 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 300 Exit Load 0-12 Months (1%),12-18 Months (0.5%),18 Months and above(NIL) Yield to Maturity 8.47% Effective Maturity 2 Years 7 Months 18 Days Modified Duration 2 Years 7 Days Growth of 10,000 investment over the years.
Date Value 31 Aug 18 ₹10,000 31 Aug 19 ₹10,810 31 Aug 20 ₹11,790 31 Aug 21 ₹12,997 31 Aug 22 ₹13,468 31 Aug 23 ₹14,316 Returns for HDFC Credit Risk Debt Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 22 Aug 23 Duration Returns 1 Month 0.4% 3 Month 1.2% 6 Month 3.6% 1 Year 6.2% 3 Year 6.7% 5 Year 7.4% 10 Year 15 Year Since launch 8.1% Historical performance (Yearly) on absolute basis
Year Returns 2022 3.7% 2021 7% 2020 10.9% 2019 8.6% 2018 5.4% 2017 6.6% 2016 11% 2015 9% 2014 2013 Fund Manager information for HDFC Credit Risk Debt Fund
Name Since Tenure Shobhit Mehrotra 25 Mar 14 9.44 Yr. Dhruv Muchhal 22 Jun 23 0.19 Yr. Data below for HDFC Credit Risk Debt Fund as on 31 Jul 23
Asset Allocation
Asset Class Value Cash 12.09% Equity 1.39% Debt 86.52% Debt Sector Allocation
Sector Value Corporate 74.27% Government 12.25% Cash Equivalent 12.09% Credit Quality
Rating Value A 4.31% AA 56.11% AAA 39.58% Top Securities Holdings / Portfolio
Name Holding Value Quantity 7.1% Govt Stock 2029
Sovereign Bonds | -4% ₹349 Cr 35,000,000 Power Finance Corporation Ltd.
Debentures | -4% ₹297 Cr 2,790 Dlf Cyber City Developers Ltd
Debentures | -3% ₹270 Cr 2,750 Pipeline Infrastructure Limited
Debentures | -3% ₹257 Cr 2,550 Ongc Petro Additions Limited
Debentures | -3% ₹256 Cr 25,500 The Tata Power Company Limited
Debentures | -3% ₹218 Cr 2,030 Resco Global Wind Services Private Limited
Debentures | -2% ₹201 Cr 20,000 TATA Motors Limited
Debentures | -2% ₹200 Cr 2,000 Ongc Petro Additions Limited
Debentures | -2% ₹200 Cr 20,000 TVS Credit Services Limited
Debentures | -2% ₹199 Cr 200 4. Axis Credit Risk Fund
CAGR/Annualized return of 7% since its launch. Ranked 4 in Credit Risk category. Return for 2022 was 4% , 2021 was 6% and 2020 was 8.2% . Axis Credit Risk Fund
Growth Launch Date 15 Jul 14 NAV (22 Aug 23) ₹18.5058 ↑ 0.00 (0.01 %) Net Assets (Cr) ₹529 on 31 Jul 23 Category Debt - Credit Risk AMC Axis Asset Management Company Limited Rating ☆☆☆☆☆ Risk Moderate Expense Ratio 1.67 Sharpe Ratio 0.21 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 8.44% Effective Maturity 2 Years 22 Days Modified Duration 1 Year 8 Months 16 Days Growth of 10,000 investment over the years.
Date Value 31 Aug 18 ₹10,000 31 Aug 19 ₹10,404 31 Aug 20 ₹11,210 31 Aug 21 ₹12,094 31 Aug 22 ₹12,537 31 Aug 23 ₹13,353 Returns for Axis Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 22 Aug 23 Duration Returns 1 Month 0.4% 3 Month 1.3% 6 Month 3.6% 1 Year 6.4% 3 Year 6% 5 Year 5.9% 10 Year 15 Year Since launch 7% Historical performance (Yearly) on absolute basis
Year Returns 2022 4% 2021 6% 2020 8.2% 2019 4.4% 2018 5.9% 2017 6.4% 2016 9.8% 2015 8.7% 2014 2013 Fund Manager information for Axis Credit Risk Fund
Name Since Tenure Devang Shah 15 Jul 14 9.14 Yr. Akhil Thakker 9 Nov 21 1.81 Yr. Data below for Axis Credit Risk Fund as on 31 Jul 23
Asset Allocation
Asset Class Value Cash 11.04% Debt 88.96% Debt Sector Allocation
Sector Value Corporate 74.27% Government 11.7% Cash Equivalent 11.04% Securitized 2.99% Credit Quality
Rating Value A 7.37% AA 48.27% AAA 44.36% Top Securities Holdings / Portfolio
Name Holding Value Quantity Motherson Sumi Systems Limited
Debentures | -6% ₹30 Cr 3,000 Godrej Industries Limited
Debentures | -5% ₹25 Cr 2,500 Godrej Housing Finance Limited
Debentures | -5% ₹25 Cr 250 Birla Corporation Limited
Debentures | -4% ₹23 Cr 230 7.26% Govt Stock 2033
Sovereign Bonds | -4% ₹21 Cr 2,050,000
↑ 1,900,000 Nexus Select Trust
Debentures | -4% ₹20 Cr 2,000 Sundew Properties Limited
Debentures | -4% ₹20 Cr 200 Dlf Cyber City Developers Ltd
Debentures | -4% ₹20 Cr 200 Sepset Constructions Limited
Debentures | -4% ₹18 Cr 210 FIRST BUSINESS RECEIVABLES TRUST
Unlisted bonds | -3% ₹16 Cr 17 5. Aditya Birla Sun Life Credit Risk Fund
CAGR/Annualized return of 7.2% since its launch. Return for 2022 was 7.1% , 2021 was 6.4% and 2020 was 9.4% . Aditya Birla Sun Life Credit Risk Fund
Growth Launch Date 17 Apr 15 NAV (22 Aug 23) ₹17.9365 ↑ 0.00 (0.01 %) Net Assets (Cr) ₹1,017 on 31 Jul 23 Category Debt - Credit Risk AMC Birla Sun Life Asset Management Co Ltd Rating Risk Moderate Expense Ratio 1.69 Sharpe Ratio 0.38 Information Ratio 0 Alpha Ratio 0 Min Investment 1,000 Min SIP Investment 100 Exit Load 0-365 Days (1%),365 Days and above(NIL) Yield to Maturity 8.15% Effective Maturity 1 Year 11 Months 8 Days Modified Duration 1 Year 6 Months 18 Days Growth of 10,000 investment over the years.
Date Value 31 Aug 18 ₹10,000 31 Aug 19 ₹10,602 31 Aug 20 ₹10,932 31 Aug 21 ₹11,932 31 Aug 22 ₹12,725 31 Aug 23 ₹13,578 Returns for Aditya Birla Sun Life Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 22 Aug 23 Duration Returns 1 Month 0.4% 3 Month 1.4% 6 Month 3.6% 1 Year 6.6% 3 Year 7.5% 5 Year 6.3% 10 Year 15 Year Since launch 7.2% Historical performance (Yearly) on absolute basis
Year Returns 2022 7.1% 2021 6.4% 2020 9.4% 2019 2.1% 2018 6.6% 2017 8.1% 2016 10.3% 2015 2014 2013 Fund Manager information for Aditya Birla Sun Life Credit Risk Fund
Name Since Tenure Sunaina Cunha 17 Apr 15 8.38 Yr. Mohit Sharma 6 Aug 20 3.07 Yr. Dhaval Joshi 21 Nov 22 0.78 Yr. Data below for Aditya Birla Sun Life Credit Risk Fund as on 31 Jul 23
Asset Allocation
Asset Class Value Cash 8.47% Equity 0.65% Debt 90.88% Debt Sector Allocation
Sector Value Corporate 67.94% Government 22.94% Cash Equivalent 8.47% Credit Quality
Rating Value A 6.87% AA 61.08% AAA 32.06% Top Securities Holdings / Portfolio
Name Holding Value Quantity 7.26% Govt Stock 2033
Sovereign Bonds | -9% ₹96 Cr 9,500,000 7.38% Govt Stock 2027
Sovereign Bonds | -5% ₹55 Cr 5,500,000 Century Textiles And Industried Limited
Debentures | -5% ₹50 Cr 5,000 TATA Projects Limited
Debentures | -5% ₹49 Cr 500 JM Financial Credit Solutions Limited
Debentures | -4% ₹37 Cr 370 Tata Realty And Infrastructure Limited
Debentures | -4% ₹36 Cr 360 Steel Authority Of India Limited
Debentures | -3% ₹30 Cr 300 Gic Housing Finance Limited
Debentures | -3% ₹30 Cr 3,000 The Tata Power Company Limited
Debentures | -3% ₹30 Cr 300 JSW Steel Limited
Debentures | -3% ₹30 Cr 300 6. ICICI Prudential Savings Fund
CAGR/Annualized return of 7.7% since its launch. Ranked 11 in Low Duration category. Return for 2022 was 4.5% , 2021 was 3.8% and 2020 was 8.6% . ICICI Prudential Savings Fund
Growth Launch Date 27 Sep 02 NAV (22 Aug 23) ₹472.283 ↑ 0.11 (0.02 %) Net Assets (Cr) ₹21,607 on 31 Jul 23 Category Debt - Low Duration AMC ICICI Prudential Asset Management Company Limited Rating ☆☆☆☆ Risk Moderately Low Expense Ratio 0.51 Sharpe Ratio 1.96 Information Ratio 0 Alpha Ratio 0 Min Investment 500 Min SIP Investment 100 Exit Load NIL Yield to Maturity 7.81% Effective Maturity 2 Years 11 Months 19 Days Modified Duration 8 Months 26 Days Growth of 10,000 investment over the years.
Date Value 31 Aug 18 ₹10,000 31 Aug 19 ₹10,875 31 Aug 20 ₹11,816 31 Aug 21 ₹12,471 31 Aug 22 ₹12,864 31 Aug 23 ₹13,834 Returns for ICICI Prudential Savings Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 22 Aug 23 Duration Returns 1 Month 0.7% 3 Month 2% 6 Month 4.1% 1 Year 7.8% 3 Year 5.4% 5 Year 6.7% 10 Year 15 Year Since launch 7.7% Historical performance (Yearly) on absolute basis
Year Returns 2022 4.5% 2021 3.8% 2020 8.6% 2019 8.8% 2018 7.3% 2017 7.1% 2016 9.1% 2015 8.8% 2014 9.5% 2013 9.6% Fund Manager information for ICICI Prudential Savings Fund
Name Since Tenure Manish Banthia 12 Jun 23 0.22 Yr. Rohan Maru 19 Sep 13 9.96 Yr. Darshil Dedhia 12 Jun 23 0.22 Yr. Data below for ICICI Prudential Savings Fund as on 31 Jul 23
Asset Allocation
Asset Class Value Cash 44.19% Debt 55.81% Debt Sector Allocation
Sector Value Government 43.64% Corporate 40.27% Cash Equivalent 16.03% Securitized 0.06% Credit Quality
Rating Value AA 3.9% AAA 96.1% Top Securities Holdings / Portfolio
Name Holding Value Quantity 8.51% Govt Stock 2033
Sovereign Bonds | -9% ₹1,951 Cr 192,237,830 7.879999999999999% Govt Stock 2028
Sovereign Bonds | -6% ₹1,287 Cr 129,190,048 7.06% Govt Stock 2028
Sovereign Bonds | -3% ₹697 Cr 70,000,000 LIC Housing Finance Limited
Debentures | -3% ₹651 Cr 6,500 HDFC Bank Limited
Debentures | -2% ₹500 Cr 50,000 Pipeline Infrastructure Limited
Debentures | -2% ₹485 Cr 4,809
↓ -250 7.93% Govt Stock 2034
Sovereign Bonds | -2% ₹465 Cr 46,625,930 6.99% Govt Stock 2026
Sovereign Bonds | -2% ₹443 Cr 44,500,000 Bajaj Finance Limited
Debentures | -2% ₹400 Cr 4,000 National Bank For Agriculture And Rural Development
Debentures | -1% ₹274 Cr 27,500
↑ 2,500
Smart Tips to Look for in Debt Funds
1. Yield
The yield is a measure of the interest Income generated by the Bonds in the Portfolio.
For instance, let's assume that a bond has a Face Value of INR 100 with an 8 percent coupon rate. This means that the investor will earn INR 8 p.a., on each bond that he invests in. As the bonds are traded in the Open Market, the price will fluctuate each Business Day. The interest rates rise and fall and demand for the bonds moves up and down. And this impacts the price of the bond. Let’s assume interest rates rise to 10 percent. Even then the investor will continue to earn INR 8. So to increase the yield to 10 percent, which is the current market rate of interest, the price of the bond will have to drop to INR 80.
In another instance, lets assume that the interest rates fall to 6 percent. Again, the investor will continue to earn INR 8. This time the price of the bond will have to go up to INR 133.
If we look at these assumptions, there are two aspects to it- the one is that the yield is not fixed, but fluctuates to changes in the interest rate. The second one is the price of the bond moves inversely to interest rates. It moves to maintain a level where it will attract buyers.
2. Yield to Maturity
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.
3. Modified Duration
Modified duration provides a fair indication of a bond’s sensitivity to a change in interest rates. The higher the duration, the more Volatility the bond exhibits with a change in interest rates
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.
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FAQs
1. How do debt fund managers identify which is high-quality security?
A: Debt fund managers have their techniques for evaluating each bond and assessing the debtor's chances of defaulting to pay the bond. Usually, the higher the credit rating lesser is the chance for the creditor defaulting.
2. Why is debt mutual funds low-risk?
A: Debt mutual funds deal with securities and bonds along other money market instruments. The chances of these instruments failing are usually less, and hence, your investment will remain secure, thereby making debt mutual funds low-risk investments.
3. Do fund managers invest in low-quality securities?
A: Yes, sometimes fund managers do invest in low-quality securities if chances of good ROI exist. However, this will be a calculated risk taken by your fund manager and only if the portfolio of investment already has stable, high-quality securities.
4. Is there any short-term debt mutual fund?
A: Yes, if you opt for a Liquid Fund in which investments are made in money market instruments that have a maturity of 91 days, then you can realize your investment in a matter of three months. This is a short-term investment that you can undertake to get a better understanding of debt mutual funds.
5. Can I invest long-term in a debt mutual fund?
A: Yes, you can invest long-term in debt mutual funds. For example, suppose you invest in the Nippon India Credit Risk Fund or the ICICI Prudential Regular Savings Fund. In that case, it is better that you hold your investment at least for one year, 5 months, and 19 days and 2 years, one month, and 2 days respectively, to get maximum ROI. But you can keep investing beyond that for 3 years.
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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