+91-22-489139096 Best Ultra Short Term Mutual Funds 2026
Have you ever left your money sitting in a Savings Account, thinking it’s safe — only to realise it’s barely growing? That’s where Ultra Short Term Mutual Funds come in.
These funds offer a smart middle path — combining the liquidity and safety of a savings account with the potential for higher returns of a short-term investment.
Whether you’re a business owner waiting for a client payment or a salaried professional saving for an upcoming goal, Ultra short term funds ensure your idle money keeps working — without locking it away.
Why Best Ultra Short Term Funds over Savings Account?
Conservative investors often hesitate to invest in Mutual Funds because of perceived market risks. They prefer a savings account — steady, simple, and seemingly safe. But here’s a truth worth noting: while savings accounts may offer stability, their returns often fail to beat inflation. Ultra short term funds, on the other hand, deliver better yield potential with only marginally higher risk.
Let’s look at a simple illustration to understand the difference.
Illustration:
An investor puts ₹4,00,000 in both an Ultra Short Term fund and a savings account at interest rates of 8% p.a. and 3.5% p.a. respectively.
| Saving Account | Ultra Short Funds | |
|---|---|---|
| Amount Invested | 4,00,000 | 4,00,000 |
| Interest Earned (Profit) | 14,000 | 32,000 |
Taxation Breakup (Saving Account) @ 3.5%
| Tax Bracket | Tax | Net Income (Profit) |
|---|---|---|
| 5% | 200 | 13,800 |
| 20% | 800 | 13,200 |
| 30% | 1,200 | 12,800 |
Taxation Breakup (Ultra Short Funds) @ 8%
| Tax Bracket | Tax | Net Income (Profit) |
|---|---|---|
| 5% | 3,200 | 28,800 |
| 20% | 6,400 | 25,600 |
| 30% | 9,600 | 22,400 |
Even for investors in the highest tax bracket, ultra short term funds offer nearly double the net return compared to a savings account. That’s the quiet power of efficient compounding.
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Fund Selection Methodology used to find 6 funds
Top 6 Ultra Short Term Funds for Investments in India FY 26 - 27
Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2024 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Aditya Birla Sun Life Savings Fund Growth ₹570.457
↑ 0.16 ₹22,857 1.3 3 7.1 7.4 7.4 6.81% 5M 19D 6M 11D ICICI Prudential Ultra Short Term Fund Growth ₹28.7812
↑ 0.01 ₹17,808 1.3 2.9 6.9 7.1 7.1 7.31% 5M 5D 6M 11D SBI Magnum Ultra Short Duration Fund Growth ₹6,205.06
↑ 1.59 ₹14,032 1.4 2.9 6.8 7.1 7 6.99% 4M 20D 6M 7D Kotak Savings Fund Growth ₹44.4877
↑ 0.01 ₹16,788 1.3 2.8 6.6 6.9 6.8 7.12% 5M 16D 6M 11D Nippon India Ultra Short Duration Fund Growth ₹4,180.44
↑ 0.79 ₹10,488 1.4 2.8 6.6 6.9 6.8 7.06% 5M 28D 8M 3D Invesco India Ultra Short Term Fund Growth ₹2,796.16
↑ 0.67 ₹1,315 1.3 2.7 6.5 6.9 6.8 7% 4M 7D 4M 15D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 20 Feb 26 Research Highlights & Commentary of 6 Funds showcased
Commentary Aditya Birla Sun Life Savings Fund ICICI Prudential Ultra Short Term Fund SBI Magnum Ultra Short Duration Fund Kotak Savings Fund Nippon India Ultra Short Duration Fund Invesco India Ultra Short Term Fund Point 1 Highest AUM (₹22,857 Cr). Upper mid AUM (₹17,808 Cr). Lower mid AUM (₹14,032 Cr). Upper mid AUM (₹16,788 Cr). Bottom quartile AUM (₹10,488 Cr). Bottom quartile AUM (₹1,315 Cr). Point 2 Established history (22+ yrs). Established history (14+ yrs). Oldest track record among peers (26 yrs). Established history (21+ yrs). Established history (24+ yrs). Established history (15+ yrs). Point 3 Top rated. Rating: 3★ (upper mid). Rating: 3★ (upper mid). Rating: 3★ (lower mid). Rating: 2★ (bottom quartile). Rating: 3★ (bottom quartile). Point 4 Risk profile: Moderately Low. Risk profile: Moderate. Risk profile: Low. Risk profile: Moderately Low. Risk profile: Low. Risk profile: Moderate. Point 5 1Y return: 7.15% (top quartile). 1Y return: 6.87% (upper mid). 1Y return: 6.75% (upper mid). 1Y return: 6.65% (lower mid). 1Y return: 6.60% (bottom quartile). 1Y return: 6.52% (bottom quartile). Point 6 1M return: 0.66% (top quartile). 1M return: 0.61% (upper mid). 1M return: 0.58% (bottom quartile). 1M return: 0.61% (lower mid). 1M return: 0.63% (upper mid). 1M return: 0.58% (bottom quartile). Point 7 Sharpe: 2.17 (top quartile). Sharpe: 2.06 (upper mid). Sharpe: 2.11 (upper mid). Sharpe: 1.52 (bottom quartile). Sharpe: 1.65 (lower mid). Sharpe: 1.37 (bottom quartile). Point 8 Information ratio: 0.00 (top quartile). Information ratio: 0.00 (upper mid). Information ratio: 0.00 (upper mid). Information ratio: 0.00 (lower mid). Information ratio: 0.00 (bottom quartile). Information ratio: 0.00 (bottom quartile). Point 9 Yield to maturity (debt): 6.81% (bottom quartile). Yield to maturity (debt): 7.31% (top quartile). Yield to maturity (debt): 6.99% (bottom quartile). Yield to maturity (debt): 7.12% (upper mid). Yield to maturity (debt): 7.06% (upper mid). Yield to maturity (debt): 7.00% (lower mid). Point 10 Modified duration: 0.47 yrs (bottom quartile). Modified duration: 0.43 yrs (upper mid). Modified duration: 0.39 yrs (upper mid). Modified duration: 0.46 yrs (lower mid). Modified duration: 0.49 yrs (bottom quartile). Modified duration: 0.35 yrs (top quartile). Aditya Birla Sun Life Savings Fund
ICICI Prudential Ultra Short Term Fund
SBI Magnum Ultra Short Duration Fund
Kotak Savings Fund
Nippon India Ultra Short Duration Fund
Invesco India Ultra Short Term Fund
*List of Funds having AUM >= 500 Crore and sorted on last 1 Year Return.
All the funds mentioned above are ideal, we are giving you detailed analysis of 3 funds.
The primary objective of the schemes is to generate regular income through investments in debt and money market instruments. Income maybe generated through the receipt of coupon payments or the purchase and sale of securities in the underlying portfolio. The schemes will under normal market conditions, invest its net assets in fixed income securities, money market instruments, cash and cash equivalents. Research Highlights for Aditya Birla Sun Life Savings Fund Below is the key information for Aditya Birla Sun Life Savings Fund Returns up to 1 year are on (Erstwhile ICICI Prudential Regular Income Fund) The fund’s objective is to generate regular income through investments primarily in debt and money market instruments. As a secondary objective, the Scheme also seeks to generate long term capital appreciation from the portion of equity investments under the Scheme. Research Highlights for ICICI Prudential Ultra Short Term Fund Below is the key information for ICICI Prudential Ultra Short Term Fund Returns up to 1 year are on (Erstwhile SBI Magnum InstaCash Fund) To provide the investors an opportunity to earn returns through investment in
debt & money market securities, while having the benefit of a very high degree of liquidity. Research Highlights for SBI Magnum Ultra Short Duration Fund Below is the key information for SBI Magnum Ultra Short Duration Fund Returns up to 1 year are on 1. Aditya Birla Sun Life Savings Fund
Aditya Birla Sun Life Savings Fund
Growth Launch Date 16 Apr 03 NAV (20 Feb 26) ₹570.457 ↑ 0.16 (0.03 %) Net Assets (Cr) ₹22,857 on 31 Jan 26 Category Debt - Ultrashort Bond AMC Birla Sun Life Asset Management Co Ltd Rating ☆☆☆☆☆ Risk Moderately Low Expense Ratio 0.55 Sharpe Ratio 2.17 Information Ratio 0 Alpha Ratio 0 Min Investment 1,000 Min SIP Investment 1,000 Exit Load NIL Yield to Maturity 6.81% Effective Maturity 6 Months 11 Days Modified Duration 5 Months 19 Days Growth of 10,000 investment over the years.
Date Value 31 Jan 21 ₹10,000 31 Jan 22 ₹10,414 31 Jan 23 ₹10,928 31 Jan 24 ₹11,721 31 Jan 25 ₹12,635 31 Jan 26 ₹13,528 Returns for Aditya Birla Sun Life Savings Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 20 Feb 26 Duration Returns 1 Month 0.7% 3 Month 1.3% 6 Month 3% 1 Year 7.1% 3 Year 7.4% 5 Year 6.3% 10 Year 15 Year Since launch 7.4% Historical performance (Yearly) on absolute basis
Year Returns 2024 7.4% 2023 7.9% 2022 7.2% 2021 4.8% 2020 3.9% 2019 7% 2018 8.5% 2017 7.6% 2016 7.2% 2015 9.2% Fund Manager information for Aditya Birla Sun Life Savings Fund
Name Since Tenure Sunaina Cunha 20 Jun 14 11.63 Yr. Kaustubh Gupta 15 Jul 11 14.56 Yr. Monika Gandhi 22 Mar 21 4.87 Yr. Data below for Aditya Birla Sun Life Savings Fund as on 31 Jan 26
Asset Allocation
Asset Class Value Cash 47.38% Debt 52.33% Other 0.29% Debt Sector Allocation
Sector Value Corporate 54.83% Cash Equivalent 30.8% Government 14.08% Credit Quality
Rating Value AA 25.17% AAA 74.83% Top Securities Holdings / Portfolio
Name Holding Value Quantity Shriram Finance Limited
Debentures | -3% ₹610 Cr 60,000 National Bank For Agriculture And Rural Development
Debentures | -2% ₹543 Cr 54,000 Nirma Limited
Debentures | -2% ₹485 Cr 48,500 Bharti Telecom Limited
Debentures | -2% ₹397 Cr 40,000 7.25% Gujarat Sgs 2026
Sovereign Bonds | -2% ₹375 Cr 37,500,000 Muthoot Finance Limited
Debentures | -2% ₹350 Cr 35,000 Mankind Pharma Limited
Debentures | -1% ₹321 Cr 32,000
↓ -2,500 National Bank For Agriculture And Rural Development
Debentures | -1% ₹302 Cr 30,000 Avanse Financial Services Limited
Debentures | -1% ₹300 Cr 30,000 Power Finance Corporation Limited
Debentures | -1% ₹296 Cr 30,000 2. ICICI Prudential Ultra Short Term Fund
ICICI Prudential Ultra Short Term Fund
Growth Launch Date 3 May 11 NAV (20 Feb 26) ₹28.7812 ↑ 0.01 (0.03 %) Net Assets (Cr) ₹17,808 on 31 Jan 26 Category Debt - Ultrashort Bond AMC ICICI Prudential Asset Management Company Limited Rating ☆☆☆ Risk Moderate Expense Ratio 0.8 Sharpe Ratio 2.06 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 1,000 Exit Load 0-1 Months (0.5%),1 Months and above(NIL) Yield to Maturity 7.31% Effective Maturity 6 Months 11 Days Modified Duration 5 Months 5 Days Growth of 10,000 investment over the years.
Date Value 31 Jan 21 ₹10,000 31 Jan 22 ₹10,412 31 Jan 23 ₹10,907 31 Jan 24 ₹11,672 31 Jan 25 ₹12,538 31 Jan 26 ₹13,391 Returns for ICICI Prudential Ultra Short Term Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 20 Feb 26 Duration Returns 1 Month 0.6% 3 Month 1.3% 6 Month 2.9% 1 Year 6.9% 3 Year 7.1% 5 Year 6% 10 Year 15 Year Since launch 7.4% Historical performance (Yearly) on absolute basis
Year Returns 2024 7.1% 2023 7.5% 2022 6.9% 2021 4.5% 2020 4% 2019 6.5% 2018 8.4% 2017 7.5% 2016 6.9% 2015 9.8% Fund Manager information for ICICI Prudential Ultra Short Term Fund
Name Since Tenure Manish Banthia 15 Nov 16 9.22 Yr. Ritesh Lunawat 15 Jun 17 8.64 Yr. Data below for ICICI Prudential Ultra Short Term Fund as on 31 Jan 26
Asset Allocation
Asset Class Value Cash 79.06% Debt 20.67% Other 0.27% Debt Sector Allocation
Sector Value Corporate 57.59% Cash Equivalent 51.73% Credit Quality
Rating Value AA 17.57% AAA 82.43% Top Securities Holdings / Portfolio
Name Holding Value Quantity RADHAKRISHNA SECURITISATION TRUST
Unlisted bonds | -3% ₹450 Cr 450 Vedanta Limited
Debentures | -2% ₹351 Cr 35,000 Goi Floating Rate Bond 2028
Sovereign Bonds | -2% ₹311 Cr 30,843,000 Muthoot Finance Limited
Debentures | -2% ₹303 Cr 30,000 Axis Bank Ltd.
Debentures | -2% ₹281 Cr 6,000 Piramal Finance Limited
Debentures | -1% ₹247 Cr 24,500
↓ -3,000 Bank of Baroda
Debentures | -1% ₹235 Cr 5,000 AU Small Finance Bank Ltd.
Debentures | -1% ₹234 Cr 5,000 Indusind Bank Ltd.
Debentures | -1% ₹233 Cr 5,000
↑ 5,000 LIC Housing Finance Ltd
Debentures | -1% ₹225 Cr 2,250 3. SBI Magnum Ultra Short Duration Fund
SBI Magnum Ultra Short Duration Fund
Growth Launch Date 21 May 99 NAV (20 Feb 26) ₹6,205.06 ↑ 1.59 (0.03 %) Net Assets (Cr) ₹14,032 on 31 Jan 26 Category Debt - Ultrashort Bond AMC SBI Funds Management Private Limited Rating ☆☆☆ Risk Low Expense Ratio 0.54 Sharpe Ratio 2.11 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 500 Exit Load NIL Yield to Maturity 6.99% Effective Maturity 6 Months 7 Days Modified Duration 4 Months 20 Days Growth of 10,000 investment over the years.
Date Value 31 Jan 21 ₹10,000 31 Jan 22 ₹10,355 31 Jan 23 ₹10,838 31 Jan 24 ₹11,602 31 Jan 25 ₹12,457 31 Jan 26 ₹13,296 Returns for SBI Magnum Ultra Short Duration Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 20 Feb 26 Duration Returns 1 Month 0.6% 3 Month 1.4% 6 Month 2.9% 1 Year 6.8% 3 Year 7.1% 5 Year 5.9% 10 Year 15 Year Since launch 7.1% Historical performance (Yearly) on absolute basis
Year Returns 2024 7% 2023 7.4% 2022 7% 2021 4.5% 2020 3.4% 2019 5.9% 2018 8% 2017 7.9% 2016 6.6% 2015 7.7% Fund Manager information for SBI Magnum Ultra Short Duration Fund
Name Since Tenure Sudhir Agrawal 15 May 25 0.72 Yr. Data below for SBI Magnum Ultra Short Duration Fund as on 31 Jan 26
Asset Allocation
Asset Class Value Cash 73.4% Debt 29.82% Other 0.34% Debt Sector Allocation
Sector Value Cash Equivalent 55.52% Corporate 39.77% Government 4.37% Credit Quality
Rating Value AA 21.49% AAA 78.51% Top Securities Holdings / Portfolio
Name Holding Value Quantity 5.63% Gs 2026
Sovereign Bonds | -6% ₹880 Cr 88,000,000
↑ 19,500,000 Small Industries Development Bank of India
Debentures | -4% ₹562 Cr 12,000 Standard Chartered Bank
- | -4% -₹500 Cr National Bank For Agriculture And Rural Development
Debentures | -3% ₹390 Cr 39,000
↓ -15,500 National Bank for Agriculture and Rural Development
Domestic Bonds | -2% ₹327 Cr 7,000
↑ 7,000 Canara Bank
Domestic Bonds | -2% ₹299 Cr 6,000 Adani Power Limited
Debentures | -2% ₹299 Cr 30,000
↑ 30,000 National Bank for Agriculture and Rural Development
Domestic Bonds | -2% ₹280 Cr 6,000
↑ 6,000 RADHAKRISHNA SECURITISATION TRUST
Unlisted bonds | -2% ₹253 Cr 255 HSBC Bank PLC
Debentures | -2% -₹250 Cr
Market Overview: Why Ultra Short Term Funds Are in Demand
Over the past few years, Indian investors have shown renewed interest in short-duration debt categories. According to AMFI data, ultra short term funds have consistently attracted monthly inflows of ₹10,000–₹15,000 crore, especially during phases of interest-rate uncertainty.
That’s because these funds benefit when:
- Rates are expected to stabilise or fall, making short-term debt attractive.
- Investors want higher returns than savings accounts but don’t want to take long-term bond risk.
In fact, several large fund houses have launched new ultra short term schemes recently — reflecting the growing appetite for low-Volatility, flexible parking options.
Features Of Ultra Short Term Funds
Fund Type: Open-ended
Fund Category: Debt Fund
Minimum Amount: INR 5,000 - 10,000
Risk Involved: Low -risk
Redemption: T+1, meaning that if you register the redemption request before 3 PM, you shall get the redemption amount after a day. However, if the redemption request is sent after 3 PM, the redemption request shall be processed day after.
Things to Consider as an Investor
1. Risk
Unlike other debt funds, the ultra-short term funds are somewhat immune to interest rate risks because of the short maturity of their underlying assets. However, as compared to Liquid Funds, these funds are pretty risky. The investment strategy of the fund manager may introduce credit risk when he incorporates low-credit rated securities in the expectation of an upgrade in future. Moreover, the introduction of government securities may increase the volatility of the fund more than expected.
2. Return
An investor can expect returns of around 7-9% from this fund in a stable interest rate environment. This return is moderately higher than what a liquid fund offers. However, even though these funds are fixed-income havens, they may not offer guaranteed returns. You need to look at Yield to Maturity (YTM) to understand what to expect with the investments at the time of investment.
3. Cost
Ultra short-term funds charge a fee to manage your money called an expense ratio. Till now the Securities and Exchange Board of India (SEBI) had mandated the upper limit of expense ratio to be 2.25% (might change time to time). Considering the overall returns generated by these funds as compared to liquid funds, a long-term holding period and lower expense ratio would help in recovering the money gone out by way of interest rate fluctuations.
4. Investment Horizon
Ultra short-term funds earn from the coupon of short-term instruments. The prices of these securities may change on a day-to-day basis and have a relatively longer maturity. These are much more volatile than liquid funds and a short time frame may seem inadequate to generate sufficient returns. As compared to liquid funds, you need to hold these funds for comparatively longer horizon owing to a higher average maturity of the underlying securities.
5. Financial Goals
You may use these funds for a variety of purposes. If you need to park money for a period of 3 months to a year, then these funds may come handy. Additionally, you may want these to transfer your funds to a riskier haven like Equity Funds. Put a lump sum in these funds and initiate a Systematic Transfer Plan (STP) to equity funds. You may look at them as an additional haven to be used as an emergency fund. If you need monthly income, then invest a portion of your superannuation Portfolio in these and initiate a systematic withdrawal plan (SWP).
6. Taxation
Dividends of ultra short term funds in India are tax-free in the hands of the investor. The AMC deducts a Dividend Distribution Tax (DDT) on behalf of the investor before it sends the dividend to the investor. If the investor has invested in a growth fund and redeemed his/her investment within 1 year, he/she may have to pay Short Term Capital Gains Tax (STCG).
Pro Tips Before You Choose a Fund
Check Portfolio Quality - Always review the fund’s factsheet. Look for AAA or sovereign-rated papers forming at least 80–90% of the portfolio.
Mind the Average Maturity - Funds with an average maturity of under 1 year are less sensitive to rate changes.
Compare Expense Ratios - Even a 0.25% difference can impact short-term returns significantly.
Consistency over Returns - Prefer funds that have steady 6-12 month performance, not just one-time high returns.
Exit Load Check - Some funds have 0.1–0.25% load for redemptions before 7 days — always verify.
How to Invest in Ultra Short Term Funds Online?
Open Free Investment Account for Lifetime at Fincash.com.
Complete your Registration and KYC Process
Upload Documents (PAN, Aadhaar, etc.). And, You are Ready to Invest!
What’s Next for Ultra Short Term Funds?
With RBI maintaining a cautious stance on interest rates, these funds are expected to offer steady 6.5–8% annualised returns in the near term. Experts suggest keeping a part of your portfolio (5–15%) in ultra short term funds as a liquid yet rewarding alternative to cash or savings accounts. As India’s bond market deepens and short-duration instruments gain traction, ultra short term funds are likely to remain one of the most practical tools for short-term money management.
Conclusion
In today’s time, people face financial insecurities every now and then. In such a case, smart investments made in mutual funds help. Ultra short term funds are one such Smart investment that offers good returns to investors in order to manage financial insecurities. So, invest in the best ultra short term funds today!
The way to wealth is easy, spend less than you earn and INVEST the difference wisely!
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well explained and got to know which one i need to pick it p
Get deep insight of the funds. Better than moneycontrol and valuereserach sort of sites.
Very good information
Presentation is very good