+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 (%) 2025 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Aditya Birla Sun Life Savings Fund Growth ₹594.432
↑ 0.21 ₹18,819 1.6 3.3 6.3 7.2 7.4 7.42% 5M 19D 7M 13D ICICI Prudential Ultra Short Term Fund Growth ₹29.971
↑ 0.01 ₹15,974 1.5 3.2 6.2 7 7.1 7.37% 10M 17D 1Y 3M 18D SBI Magnum Ultra Short Duration Fund Growth ₹6,461.02
↑ 0.97 ₹11,880 1.6 3.1 6.2 6.9 7 7.18% 4M 28D 7M 24D Nippon India Ultra Short Duration Fund Growth ₹4,353.68
↑ 1.22 ₹12,447 1.5 3.1 6.2 6.8 6.8 7.35% 5M 11D 7M 4D Invesco India Ultra Short Term Fund Growth ₹2,914.22
↑ 0.61 ₹1,661 1.6 3.2 6.2 6.9 6.8 7.03% 5M 3D 5M 7D UTI Ultra Short Term Fund Growth ₹4,569.83
↑ 1.16 ₹3,536 1.5 3.1 6 6.7 6.6 7.13% 5M 8D 6M 21D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 13 Oct 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 Nippon India Ultra Short Duration Fund Invesco India Ultra Short Term Fund UTI Ultra Short Term Fund Point 1 Highest AUM (₹18,819 Cr). Upper mid AUM (₹15,974 Cr). Lower mid AUM (₹11,880 Cr). Upper mid AUM (₹12,447 Cr). Bottom quartile AUM (₹1,661 Cr). Bottom quartile AUM (₹3,536 Cr). Point 2 Established history (23+ yrs). Established history (15+ yrs). Oldest track record among peers (27 yrs). Established history (24+ yrs). Established history (15+ yrs). Established history (23+ yrs). Point 3 Top rated. Rating: 3★ (upper mid). Rating: 3★ (lower mid). Rating: 2★ (bottom quartile). Rating: 3★ (bottom quartile). Rating: 4★ (upper mid). Point 4 Risk profile: Moderately Low. Risk profile: Moderate. Risk profile: Low. Risk profile: Low. Risk profile: Moderate. Risk profile: Moderately Low. Point 5 1Y return: 6.31% (top quartile). 1Y return: 6.20% (upper mid). 1Y return: 6.20% (upper mid). 1Y return: 6.19% (lower mid). 1Y return: 6.18% (bottom quartile). 1Y return: 5.98% (bottom quartile). Point 6 1M return: 0.47% (top quartile). 1M return: 0.43% (bottom quartile). 1M return: 0.46% (lower mid). 1M return: 0.47% (upper mid). 1M return: 0.46% (upper mid). 1M return: 0.45% (bottom quartile). Point 7 Sharpe: 1.00 (top quartile). Sharpe: 1.00 (upper mid). Sharpe: 0.92 (lower mid). Sharpe: 0.96 (upper mid). Sharpe: 0.83 (bottom quartile). Sharpe: 0.61 (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): 7.42% (top quartile). Yield to maturity (debt): 7.37% (upper mid). Yield to maturity (debt): 7.18% (lower mid). Yield to maturity (debt): 7.35% (upper mid). Yield to maturity (debt): 7.03% (bottom quartile). Yield to maturity (debt): 7.13% (bottom quartile). Point 10 Modified duration: 0.47 yrs (bottom quartile). Modified duration: 0.88 yrs (bottom quartile). Modified duration: 0.41 yrs (top quartile). Modified duration: 0.45 yrs (lower mid). Modified duration: 0.42 yrs (upper mid). Modified duration: 0.44 yrs (upper mid). Aditya Birla Sun Life Savings Fund
ICICI Prudential Ultra Short Term Fund
SBI Magnum Ultra Short Duration Fund
Nippon India Ultra Short Duration Fund
Invesco India Ultra Short Term Fund
UTI 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 (13 Oct 26) ₹594.432 ↑ 0.21 (0.03 %) Net Assets (Cr) ₹18,819 on 31 Aug 26 Category Debt - Ultrashort Bond AMC Birla Sun Life Asset Management Co Ltd Rating ☆☆☆☆☆ Risk Moderately Low Expense Ratio 0.57 Sharpe Ratio 1 Information Ratio 0 Alpha Ratio 0 Min Investment 1,000 Min SIP Investment 1,000 Exit Load NIL Yield to Maturity 7.42% Effective Maturity 7 Months 13 Days Modified Duration 5 Months 19 Days Growth of 10,000 investment over the years.
Date Value 30 Sep 21 ₹10,000 30 Sep 22 ₹10,404 30 Sep 23 ₹11,140 30 Sep 24 ₹11,981 30 Sep 25 ₹12,919 30 Sep 26 ₹13,735 Returns for Aditya Birla Sun Life Savings Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 13 Oct 26 Duration Returns 1 Month 0.5% 3 Month 1.6% 6 Month 3.3% 1 Year 6.3% 3 Year 7.2% 5 Year 6.6% 10 Year 15 Year Since launch 7.4% Historical performance (Yearly) on absolute basis
Year Returns 2025 7.4% 2024 7.9% 2023 7.2% 2022 4.8% 2021 3.9% 2020 7% 2019 8.5% 2018 7.6% 2017 7.2% 2016 9.2% Fund Manager information for Aditya Birla Sun Life Savings Fund
Name Since Tenure Sunaina Cunha 20 Jun 14 12.21 Yr. Kaustubh Gupta 15 Jul 11 15.14 Yr. Monika Gandhi 22 Mar 21 5.45 Yr. Data below for Aditya Birla Sun Life Savings Fund as on 31 Aug 26
Asset Allocation
Asset Class Value Cash 39.91% Debt 60.09% Debt Sector Allocation
Sector Value Corporate 71.12% Government 19.75% Cash Equivalent 9.12% Credit Quality
Rating Value AA 33.08% AAA 66.92% Top Securities Holdings / Portfolio
Name Holding Value Quantity India (Republic of)
- | -5% ₹850 Cr 85,000,000 National Bank for Agriculture and Rural Development
Domestic Bonds | -4% ₹739 Cr 15,300 Shriram Finance Limited
Debentures | -3% ₹530 Cr 52,500 Vedanta Limited
Debentures | -2% ₹450 Cr 44,500 Bharti Telecom Limited
Debentures | -2% ₹397 Cr 40,000 Muthoot Finance Limited
Debentures | -2% ₹324 Cr 32,500 Mankind Pharma Limited
Debentures | -2% ₹320 Cr 32,000 Avanse Financial Services Limited
Debentures | -2% ₹298 Cr 30,000 Adani Airport Holdings Limited
Debentures | -2% ₹296 Cr 30,000 AU Small Finance Bank Ltd.
Debentures | -2% ₹292 Cr 6,000 2. ICICI Prudential Ultra Short Term Fund
ICICI Prudential Ultra Short Term Fund
Growth Launch Date 3 May 11 NAV (13 Oct 26) ₹29.971 ↑ 0.01 (0.02 %) Net Assets (Cr) ₹15,974 on 31 Aug 26 Category Debt - Ultrashort Bond AMC ICICI Prudential Asset Management Company Limited Rating ☆☆☆ Risk Moderate Expense Ratio 0.8 Sharpe Ratio 1 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 7.37% Effective Maturity 1 Year 3 Months 18 Days Modified Duration 10 Months 17 Days Growth of 10,000 investment over the years.
Date Value 30 Sep 21 ₹10,000 30 Sep 22 ₹10,388 30 Sep 23 ₹11,095 30 Sep 24 ₹11,911 30 Sep 25 ₹12,789 30 Sep 26 ₹13,586 Returns for ICICI Prudential Ultra Short Term Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 13 Oct 26 Duration Returns 1 Month 0.4% 3 Month 1.5% 6 Month 3.2% 1 Year 6.2% 3 Year 7% 5 Year 6.3% 10 Year 15 Year Since launch 7.4% Historical performance (Yearly) on absolute basis
Year Returns 2025 7.1% 2024 7.5% 2023 6.9% 2022 4.5% 2021 4% 2020 6.5% 2019 8.4% 2018 7.5% 2017 6.9% 2016 9.8% Fund Manager information for ICICI Prudential Ultra Short Term Fund
Name Since Tenure Manish Banthia 15 Nov 16 9.8 Yr. Ritesh Lunawat 15 Jun 17 9.22 Yr. Data below for ICICI Prudential Ultra Short Term Fund as on 31 Aug 26
Asset Allocation
Asset Class Value Cash 81.46% Debt 18.23% Other 0.31% Debt Sector Allocation
Sector Value Corporate 60.13% Cash Equivalent 48.04% Credit Quality
Rating Value AA 18.98% AAA 81.02% Top Securities Holdings / Portfolio
Name Holding Value Quantity India (Republic of)
- | -3% ₹499 Cr 50,000,000 National Bank For Agriculture And Rural Development
Debentures | -2% ₹374 Cr 37,500
↑ 12,500 Small Industries Development Bank Of India
Debentures | -2% ₹350 Cr 35,000 National Bank For Agriculture And Rural Development
Debentures | -2% ₹326 Cr 32,500 Vedanta Limited
Debentures | -2% ₹318 Cr 31,500 6.17% Govt Stock 2028
Sovereign Bonds | -2% ₹310 Cr 30,773,600 India (Republic of)
- | -2% ₹299 Cr 30,000,000 RADHAKRISHNA SECURITISATION TRUST
Unlisted bonds | -2% ₹271 Cr 275 AU Small Finance Bank Ltd.
Debentures | -2% ₹246 Cr 5,000 Piramal Finance Limited
Debentures | -1% ₹231 Cr 23,000 3. SBI Magnum Ultra Short Duration Fund
SBI Magnum Ultra Short Duration Fund
Growth Launch Date 21 May 99 NAV (13 Oct 26) ₹6,461.02 ↑ 0.97 (0.02 %) Net Assets (Cr) ₹11,880 on 31 Aug 26 Category Debt - Ultrashort Bond AMC SBI Funds Management Private Limited Rating ☆☆☆ Risk Low Expense Ratio 0.54 Sharpe Ratio 0.92 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 500 Exit Load NIL Yield to Maturity 7.18% Effective Maturity 7 Months 24 Days Modified Duration 4 Months 28 Days Growth of 10,000 investment over the years.
Date Value 30 Sep 21 ₹10,000 30 Sep 22 ₹10,371 30 Sep 23 ₹11,080 30 Sep 24 ₹11,895 30 Sep 25 ₹12,757 30 Sep 26 ₹13,549 Returns for SBI Magnum Ultra Short Duration Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 13 Oct 26 Duration Returns 1 Month 0.5% 3 Month 1.6% 6 Month 3.1% 1 Year 6.2% 3 Year 6.9% 5 Year 6.3% 10 Year 15 Year Since launch 7% Historical performance (Yearly) on absolute basis
Year Returns 2025 7% 2024 7.4% 2023 7% 2022 4.5% 2021 3.4% 2020 5.9% 2019 8% 2018 7.9% 2017 6.6% 2016 7.7% Fund Manager information for SBI Magnum Ultra Short Duration Fund
Name Since Tenure Sudhir Agrawal 15 May 25 1.3 Yr. Data below for SBI Magnum Ultra Short Duration Fund as on 31 Aug 26
Asset Allocation
Asset Class Value Cash 108.18% Other 0.41% Debt Sector Allocation
Sector Value Cash Equivalent 67.65% Corporate 45.43% Credit Quality
Rating Value AA 21.96% AAA 78.04% Top Securities Holdings / Portfolio
Name Holding Value Quantity India (Republic of)
- | -7% ₹796 Cr 80,000,000 Muthoot Finance Limited
Debentures | -3% ₹324 Cr 32,500 Adani Power Limited
Debentures | -3% ₹300 Cr 30,000 Deutsche Bank AG
- | -2% -₹250 Cr HSBC Bank PLC
Debentures | -2% -₹250 Cr Avanse Financial Services Limited
Debentures | -2% ₹249 Cr 25,000 RADHAKRISHNA SECURITISATION TRUST
Unlisted bonds | -2% ₹247 Cr 255 Axis Bank Ltd.
Debentures | -2% ₹246 Cr 5,000 Bharat Petroleum Corporation Limited
Debentures | -2% ₹200 Cr 2,000
↑ 2,000 Muthoot Finance Limited
Debentures | -2% ₹199 Cr 20,000
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