Want To Invest In Mutual Funds For 1,3 or 6 Months? Here Are Top 5 Low-Duration Debt Mutual Funds

Mutual Fund investment is often considered for those who are willing to park their money for longer durations, like five or ten years. These investment tools offer a unique blend of exposure to equity markets and relatively lower volatility.

For investors who are willing to park their money in mutual funds for a shorter duration, like six, four, three, two or even one month, can consider debt mutual funds.
Unlike equity mutual funds, debt mutual funds invest the money into fixed-income securities like bonds, government securities, and other debt instruments. Hence, they provide investors with relatively stable returns and low risk compared to equity investments.

The only common link between equity mutual funds and debt mutual funds is that investors will not directly put their money into a tool. Rather, their money will be collectively invested by a mutual fund manager into multiple investment options based on market situations and other factors.

What is Debt Mutual Funds?

Debt mutual funds are a type of pooled investment option where the investors' money is lent to the government, companies, or banks. In return, investors earn interest just like a bank that gives out loans.

Best Debt Mutual Funds For 1, 3, 6 months investment

Debt mutual funds are sub-categorised into long duration, medium to long duration, short duration, money market, low duration, ultra short duration, liquid, overnight, dynamic bond, corporate bond, credit risk, banking and PSU, floater, FMP, gilt, etc.
Low-duration debt mutual funds offer investment options in bonds and debt instruments for a duration of one month to even ten years. Here are the top performing mutual funds in the category for a duration of one, two or three months, according to Association of Mutual Funds in India data as on 26 July, 2025.

Best Debt Mutual Funds For 1 Month Duration

Scheme Name	Benchmark	Riskometer	Latest NAV (₹)	1-Month Return (%)
			Regular	Direct
Aditya Birla Sun Life Low Duration Fund	NIFTY Low Duration Debt Index A-I	Moderate	681.0496	732.6214
Axis Treasury Advantage Fund	NIFTY Low Duration Debt Index A-I	Low to Moderate	3116.1345	3267.3621
Bandhan Low Duration Fund	NIFTY Low Duration Debt Index A-I	Low to Moderate	38.8414	39.7961
Baroda BNP Paribas Low Duration Fund	CRISIL Low Duration Debt A-I Index	Low to Moderate	40.3370	44.1870
Canara Robeco Savings Fund	CRISIL Low Duration Debt A-I Index	Low to Moderate	42.4438	43.6252

Best Debt Mutual Funds For 3 Months Duration

Scheme Name	Benchmark	Riskometer (Scheme)	3-Month Return (%) Regular	3-Month Return (%) Direct
HSBC Low Duration Fund	NIFTY Low Duration Debt Index A-I	Low to Moderate	12.33	12.98
ICICI Prudential Savings Fund	NIFTY Low Duration Debt Index A-I	Moderate	7.82	7.93
Franklin India Low Duration Fund	NIFTY Low Duration Debt Index A-I	Low to Moderate	7.79	8.45
UTI Low Duration Fund	NIFTY Low Duration Debt Index A-I	Low to Moderate	7.74	7.83
Axis Treasury Advantage Fund	NIFTY Low Duration Debt Index A-I	Low to Moderate	7.70	8.02

Best Mutual Fund For 6 Months Duration

Scheme Name	Benchmark	6-Month Return (%) Regular	6-Month Return (%) Direct
HSBC Low Duration Fund	NIFTY Low Duration Debt Index A-I	11.19	11.80
ICICI Prudential Savings Fund	NIFTY Low Duration Debt Index A-I	8.88	9.10
UTI Low Duration Fund	NIFTY Low Duration Debt Index A-I	8.88	8.87
Axis Treasury Advantage Fund	NIFTY Low Duration Debt Index A-I	8.87	9.19
HDFC Low Duration Fund	NIFTY Low Duration Debt Index A-I	8.71	9.31

Low-duration funds are a popular choice for investors seeking stable returns. These funds invest in debt and money market instruments with maturities ranging from 6 to 12 months. They offer better returns than savings accounts or ultra-short duration funds, while maintaining low volatility.

Interest Rate Sensitivity

The short average maturity of these funds makes them less sensitive to interest rate fluctuations compared to long-duration bond funds. This characteristic provides stability in environments where rates are changing frequently.

Investors often appreciate the lower credit risk associated with many low-duration funds. These funds typically include high-quality instruments such as government securities, treasury bills, and AAA-rated corporate bonds. This reduces the likelihood of default, although it depends on the specific portfolio of each fund.

Liquidity and Accessibility

One of the key advantages of low-duration funds is their liquidity. Investors can redeem their investments quickly, usually within one working day. This makes them an excellent option for short-term needs or for parking idle funds temporarily.

For those holding these investments for over three years, there is an added benefit of tax efficiency. While gains are taxed according to the slab if held for less than three years, longer holdings may qualify for indexation benefits, making them more tax-efficient than fixed deposits.