Plan to open a fixed deposit? These short-term debt funds can be better options
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Plan to open a fixed deposit? These short-term debt funds can be better options

However, investors should consider that debt funds don't guarantee any returns while the interest from FDs are assured. Debt funds carry default risk (company defaulting on bond payments) and credit risk (fall in price due to change is interest rate scenario). 

  • March 17, 2017  
  • |  
  • UPDATED   18:24 IST
Plan to open a fixed deposit? These short-term debt funds can be better options

Post demonetisation, when investors are looking to maximise returns, and fixed deposits rates of almost all banks are hovering below 8 percent, we look at the performance of short-term debt funds which generally manage to beat FD returns. They are also tax efficient compared to fixed deposits as they provide indexation benefit on the gains after three years.

However, investors should consider that debt funds don't guarantee any returns while the interest from FDs are assured. Debt funds carry default risk (company defaulting on bond payments) and credit risk (fall in price due to change is interest rate scenario).  

So, if you are willing to take some risk and invest for at least one year, debt funds can be a good bet for your portfolio.

We list out star performers based on three-year ratings assigned by Value Research as on November 30, 2016.

Franklin India Low Duration fund: The fund (regular plan) was launched on July 26, 2010. Its benchmark of returns is Crisil Short term bond. The open-ended fund has given 9.64 percent returns since launch. From the house of Franklin Templeton Mutual fund, it has peers such as Baroda Pioneer short term bond fund, BOI AXA short term income fund-regular plan, Indiabulls short term fund, UTI banking and PSU debt fund. On December 31, 2016, the fund has assets worth Rs  2,416 crore. Its managers are Santosh Kamath and Kunal Agrawal.

Reliance Medium term fund: The fund was launched on September 5, 2000 and and its benchmark of returns is crisil short term bonds. The fund has given 7.71 percent returns since its launch. On December 31, 2016, it hasd assets worth Rs 10,798 crore under management. It has peers such as Birla Sun Life Short Term Fun, BOI AXA short term income fund plan, escorts short term debt fund  and HDFC short term fund.

HDFC short term fund: The fund (regular) was launched on February 28, 2002 and its returns are benchmarked to Crisil short-term bond.  The open ended fund has given 8.13 percent returns since launch. on December 31, 2016, it had assest worth Rs 3978 crore.  The short-term fund has peers such as Birla Sun life short term fund, BOI AXA short term income fund, escorts short term debt fund and Reliance Medium Term fund.

Indiabulls Short-Term Fund regular plan: The fund was launched on September 13, 2013  and its benchmark of returns is Crisil short term bond. The fund has delivered  9.10 percent returns since launch. On December 31, 2016, the assest under management were Rs 584 crore. The open ended fund has peers such as Baroda Pioneer fund short term bond fund, BOI AXA short term income fund plan, Franklin India low duration fund and UTI banking and PSU debt fund. Mr Malay Shah is the fund manager.

Birla Sun Life short term fund: The fund (regular) was launched on  March 3, 1997 and its returns are benchmarked to crisil short term bond. The fund has delivered  9.59 percent returns since launch. On 31 December 2016, the fund had Rs 15595 crore assets under management (AUMs).  It has peers such as BOI AXA short term income fund, Escorts short term debt fund, HDFC short term fund and Reliance Medium term fund.