In India, fixed income mutual funds are a popular choice for those who want a steady and predictable way to grow their money. Unlike stocks, which can swing wildly, fixed income mutual funds focus on investments like bonds and government securities that pay regular interest. As of March 2025, these funds are a key part of the investment scene, offering a range of options for different needs.
What Are Fixed Income Mutual Funds?
Fixed income mutual funds are investment options where money from many investors is pooled together and put into assets that pay a fixed return, like bonds or treasury bills. Imagine a big pot where everyone chips in, and a fund manager uses that cash to buy things like government securities or company bonds.
These assets generate interest over time, which is why they’re called “fixed income”—the payments come regularly, offering a calmer ride than the stock market. In India, fixed income mutual funds are widely used because they aim to deliver stable earnings, making them a solid part of many financial plans as of March 2025.
Fixed Income Mutual Funds Differ from Other
Unlike equity mutual funds that chase stock market growth, fixed income mutual funds focus on generating income rather than big jumps in value. Equity funds might spike during a market boom but tumble in a crash, while fixed income mutual funds aim for consistency. They’re less about chasing thrills and more about providing a predictable flow of returns. This difference is why fixed income mutual funds in India attract those who prefer a smoother financial path over the ups and downs of stocks.
How Fixed Income Mutual Funds Work in India
So how do fixed income mutual funds operate? When you invest, your money joins a collective pool managed by an expert. This manager picks fixed-income securities—like bonds from companies or the government—based on the fund’s objectives. For example, if you put ₹20,000 into a fixed income mutual fund, it might help buy a bond paying 6% interest annually.
The fund collects this interest, blends it with returns from other holdings, and either pays it out as dividends or reinvests it. The value of your investment, known as the Net Asset Value (NAV), shifts with these earnings and market changes, giving you a snapshot of how your fixed income mutual fund is doing.
Return of Fixed Income Mutual Fund
Returns from fixed income mutual funds come mainly from two places: interest income and capital gains. Interest income is the regular payout from the securities—like that 6% bond earning ₹1,200 yearly on ₹20,000. Capital gains kick in if the fund sells a bond for more than it paid—say, a ₹10,000 bond bought years ago fetches ₹10,500 today. These earnings shape the NAV, which you can check daily. In India, fixed income mutual funds are known for this steady trickle of income, contrasting with the uncertainty of equity funds.
10 Notable Fixed Income Mutual Funds in India
Here’s a look at 10 fixed income mutual funds in India that stand out based on their assets under management (AUM), past returns, and category as of early 2025. This isn’t a ranking—just a detailed rundown of some prominent options.
1. ICICI Prudential Corporate Bond Fund
The ICICI Prudential Corporate Bond Fund is one of the big names among fixed income mutual funds in India. It invests mostly in high-quality corporate bonds rated AA+ or above, aiming for steady returns with moderate risk. As of December 2024, it manages assets worth over ₹26,000 crore. The fund’s NAV recently stood around ₹28, reflecting its growth over time. With a focus on bonds from top companies, this fixed income mutual fund balances income generation with safety.
Performance Snapshot
Over the past 3 years, this fund has delivered an annualized return of about 6.5%, and over 5 years, it’s around 7%. Its expense ratio—a fee for managing the fund—is roughly 0.5%, which is on the lower side for fixed income mutual funds. The average maturity of its holdings is about 3-4 years, making it moderately sensitive to interest rate changes.
2. HDFC Short Term Debt Fund
The HDFC Short Term Debt Fund is a well-known player in the short-term category of fixed income mutual funds. It targets securities maturing in 1-3 years, like corporate bonds and government papers, keeping fluctuations low. With an AUM of over ₹13,000 crore as of late 2024, it’s a sizable fund. Its NAV hovers around ₹27, showing steady progress for this fixed income mutual fund.
Performance Snapshot
This fund has posted a 3-year annualized return of approximately 6% and a 5-year return of 6.8%. The expense ratio sits at 0.4%, making it cost-efficient among fixed income mutual funds. Its short duration—around 2 years—means it’s less rattled by interest rate shifts, a plus for stability seekers.
3. SBI Magnum Gilt Fund
The SBI Magnum Gilt Fund focuses solely on government securities, making it one of the safest fixed income mutual funds in India. With no default risk—thanks to government backing—it’s a haven for cautious investors. As of December 2024, its AUM is over ₹8,000 crore, and its NAV is near ₹60, reflecting a long track record since its launch.
Performance Snapshot
Over 3 years, it’s averaged a 6.7% annualized return, and over 5 years, it’s closer to 7.2%. The expense ratio is about 0.6%, reasonable for fixed income mutual funds in this category. Its average maturity stretches to 8-10 years, so it feels interest rate changes more than shorter-term funds.
4. Aditya Birla Sun Life Liquid Fund
The Aditya Birla Sun Life Liquid Fund is a standout in the liquid category of fixed income mutual funds. It invests in ultra-short-term instruments—like treasury bills and commercial papers—maturing in 91 days or less. With an AUM exceeding ₹40,000 crore, it’s one of India’s largest fixed income mutual funds. Its NAV is around ₹380, built over years of small, steady gains.
Performance Snapshot
This fund has delivered a 3-year annualized return of 5.8% and a 5-year return of 6%. Its expense ratio is a low 0.2%, making it a cost-effective choice among fixed income mutual funds. With an average maturity of just 1-2 months, it’s highly stable and liquid.
5. NIPPON India Nivesh Lakshya Fund
The NIPPON India Nivesh Lakshya Fund is a long-term fixed income mutual fund targeting securities with maturities over 10 years, like government bonds. Its AUM is around ₹7,500 crore, and its NAV is near ₹16 as of late 2024. This fund appeals to those comfortable with longer horizons among fixed income mutual funds.
Performance Snapshot
It’s shown a 3-year return of about 6.9% and a 5-year return of 7.1%, with an expense ratio of 0.5%. Its long duration—around 11 years—makes it more sensitive to rate changes, a key trait of such fixed income mutual funds.
6. Axis Banking & PSU Debt Fund
The Axis Banking & PSU Debt Fund invests in bonds from banks and public sector units, blending safety with decent returns. With an AUM of over ₹13,500 crore, it’s a solid contender among fixed income mutual funds. Its NAV is around ₹2,300, reflecting consistent growth over time.
Performance Snapshot
This fund has a 3-year annualized return of 6% and a 5-year return of 6.7%, with a low expense ratio of 0.3%. Its average maturity of 2-3 years keeps it fairly stable among fixed income mutual funds in India.
7. Kotak Bond Fund
The Kotak Bond Fund is a dynamic fixed income mutual fund that adjusts its holdings—short or long-term bonds—based on market conditions. Its AUM is over ₹2,000 crore, with an NAV near ₹70. This flexibility sets it apart in the world of fixed income mutual funds.
Performance Snapshot
It’s averaged 6.4% over 3 years and 6.9% over 5 years, with an expense ratio of 0.7%. Its shifting duration—currently around 5 years—offers a balanced approach among fixed income mutual funds.
8. UTI Money Market Fund
The UTI Money Market Fund targets short-term money market instruments like commercial papers and CDs, with maturities up to 1 year. Its AUM is over ₹14,000 crore, and its NAV is around ₹2,800, a testament to its long history among fixed income mutual funds.
Performance Snapshot
This fund has a 3-year return of 6% and a 5-year return of 6.2%, with an expense ratio of 0.25%. Its short maturity—under 6 months—makes it a low-fluctuation option among fixed income mutual funds.
9. Franklin India Ultra Short Bond Fund
The Franklin India Ultra Short Bond Fund invests in ultra-short securities (3-6 months maturity), like corporate bonds and CDs. With an AUM of around ₹2,500 crore, its NAV is near ₹30, marking it as a compact yet notable fixed income mutual fund.
Performance Snapshot
It’s delivered a 3-year return of 5.9% and a 5-year return of 6.5%, with an expense ratio of 0.4%. Its ultra-short focus keeps it steady among fixed income mutual funds in India.
10. DSP Low Duration Fund
The DSP Low Duration Fund targets securities with maturities of 6-12 months, like treasury bills and high-rated bonds. Its AUM is over ₹4,000 crore, with an NAV around ₹17, making it a compact player among fixed income mutual funds.
Performance Snapshot
This fund has a 3-year return of 6% and a 5-year return of 6.3%, with an expense ratio of 0.3%. Its low duration offers stability, a hallmark of short-term fixed income mutual funds.
10 fixed income mutual funds highlighted here—ICICI Prudential Corporate Bond, HDFC Short Term Debt, SBI Magnum Gilt, and others—showcase the diversity in India’s fixed income space as of March 2025. From ultra-short liquid funds to long-term gilt funds, these fixed income mutual funds offer a spectrum of options with varying returns, risks, and durations. They’re built on the idea of steady income through bonds and securities, shaped by interest rates, credit quality, and economic tides. This guide has laid out their features and workings in simple terms, giving you a clear window into what fixed income mutual funds bring to the table in India’s vibrant financial market.
Disclaimer: This article is for informational purposes only and does not offer investment advice. Fund details may change, so verify with official sources or platforms before proceeding. Investing involves risks, and outcomes vary—always research thoroughly.
