Top Debt Mutual Funds to invest in 2016 in India

Top Debt Mutual Funds to invest in India in 2016Top Debt Mutual Funds to invest in 2016 in India

We have seen that RBI continues to cut rates and banks would continue to reduce FD interest rates. If you are planning to invest in fixed income schemes, but want to get higher returns than bank FD’s, best way is to invest in top debt mutual funds. I have analyzed best debt funds to invest in, which have been giving good returns in last 5 years. Which are the top debt mutual funds to invest in 2016 in India? Which are the best debt funds to invest in, which are  good for short term and long term?

Also Read: Best Sector Mutual Funds to invest in 2016

Parameters on how picked up Top Debt Mutual Funds to invest

These debt mutual fund schemes have been analyzed and shortlisted based on some of the important parameters.

  • These are picked based on highest returns received in the last 5 years.
  • These debt mutual fund schemes which are rated as 5-Star (5/5), 4-Star (4/5) and 3-Star (3/5) by value research online.
  • Funds, which are rated by Crisil as Rank-1, Rank-2, Rank-3 and Rank-4 which indicates top performance across various market cycles. Two funds have not been rated by Crisil, however, I have picked the same based on other parameters.
  • AUM (Assets under management) > Rs 100 Crores. This proves investor confidence among these top 10 mutual funds. As an exception, I have considered one good fund, which has an AUM of Rs 97 Crores.
  • Some of the funds might be a repetition from my earlier recommendation.

Top Debt Mutual Funds to invest in 2016 in India

I have segregated them in under various heads like the ultra short term, income funds and gilt mutual funds.

1) Ultra Short Term Debt funds

Ultra short-term funds invest in fixed-income instruments which are generally liquid and have short term maturities within 90 days. These short term funds offer investors good protection against interest rate risk compared to other funds. An investor who is willing to invest for 3-9 months can invest in these ultra short term mutual funds. I advise you to invest in these debt mutual fund schemes for at least for 3-9 months to get good returns.

2) Debt – Income funds

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Debt income funds invest in various fixed income options, maturing between medium term to long term. If you are willing to park your money for medium term to long term of 1 to 5 years, you can invest in these income funds. Note that these funds does not limit to investing in Govt bonds, but invests in corporate bonds too.

3) Gilt-Medium/Long Term

Gilt Funds are those funds that invest only in government securities. They debt mutual fund schemes are preferred to conservative investors who wish to invest in indirectly in government bonds. Since gilt funds invest only in government bonds, investors are protected from credit risk.

Also Read: Top Mid-cap Mutual Funds to invest in India

List of Top Debt Mutual Funds to invest in 2016 in India

Conclusion: I believe in investing in these debt mutual funds which gives higher returns compared to bank FD interest rates. If you can invest for at least 36 months in income/gilt mutual funds, you can get indexation benefit and tax on such debt funds would be very low.

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Top Debt Mutual Funds to invest in 2016 in India

Suresh KP


  • Mukesh

    Hi Suresh –
    I have been investing in equity mutual funds (7k/m), ELSS (8k/m), RD(3k/m).
    Now my RD is nearing maturity and I am looking for an investment tool that gives me flexibilty of having emergency cash when I need them.
    Would you advise me to go for another RD or Debt fund or any other instrument? Please advise.




  • Gaurav

    Hi Suresh,

    How are capital protection funds and how are they different from debt funds. I would like to invest lumpsum in safe instruments as my portfolio already is completely equity oriented. How do i diversify ? Have been advised to look at Reliance Dual Advantage Fixed Tenure Fund IX – Plan D by my banker.

  • Satish Reddy

    I was under the assumption that debt funds have little to no charges. Although it’s true, while we invest through brokers like icicidirect, they charge a one-time service fee of Rs.100/-. The investment in these funds seems beneficial only if invest big amounts.

    This my experience with icicidirect in buying MF “FRANKLIN INDIA ULTRA SHORT BOND FUND – SUPER INSTITUTIONAL PLAN GROWTH”.

    Are these charges common with all the brokers? Pls. clarify.

  • Kumar

    Thanks for the wonderful article, could you please provide more clarity on options between Dividend pay out, growth and dividend re-invest option in Debt mutual funds from the taxation perspective.

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