The rule behind "best"
"Best" is not one thing, so this post fixes a rule and applies it the same way in every category of this series. Of the 22 short duration funds with a 3-year record, 9 are open to new money, hold at least ₹1,000 crore (average AUM, July–September 2026) and have a 5-year record. They are ranked by 3-year compounded annual return, Direct plan, Growth option, from NAVs to 27 October 2026. On that rule the leader is Bandhan Short Term Fund at 7.62% a year, against a category median of 7.20%. The same fund tops the list with no filter applied.
A short duration fund holds bonds whose average life is one to three years. That is long enough for interest rate moves to show in the NAV and short enough that a bad year is usually small. The return differences between funds are measured in fractions of a point, so cost and credit quality count for more than they do in equity.
The top five
| Fund | 1 year | 3 years | 5 years | 10 years | Expense ratio | AUM (₹ crore) |
|---|---|---|---|---|---|---|
| Bandhan Short Term Fund | 5.47% | 7.62% | 6.45% | 7.08% | 0.39% | 9,041 |
| ICICI Prudential Short Term Fund | 4.82% | 7.43% | 6.95% | 7.62% | 0.45% | 19,244 |
| Nippon India Short Term Fund | 4.36% | 7.41% | 6.57% | 7.18% | 0.40% | 6,880 |
| Aditya Birla Sun Life Short Term Fund | 4.50% | 7.39% | 6.74% | 7.37% | 0.36% | 5,853 |
| Kotak Short Term Fund | 4.26% | 7.21% | 6.33% | 7.15% | 0.38% | 14,379 |
| Category median | 4.34% | 7.20% | 6.33% | – | – | – |
Returns of a year or more are compounded annual rates. Bandhan Short Term Fund leads the median by 0.42 points a year over three years, and ICICI Prudential Short Term Fund follows at 7.43%.
Risk: what the lead cost
| Fund | Volatility (3 yr) | Worst fall (3 yr) | Sharpe ratio |
|---|---|---|---|
| Bandhan Short Term Fund | 1.0% | −0.6% | 1.10 |
| ICICI Prudential Short Term Fund | 0.9% | −0.6% | 0.98 |
| Nippon India Short Term Fund | 1.0% | −0.6% | 0.91 |
Volatility is the annualised standard deviation of daily returns; the worst fall is the deepest peak-to-trough drop in the last three years. The Sharpe ratio uses a 6.5% risk-free rate.
What a monthly SIP earned
| Fund | 3-year SIP return (a year) | 5-year SIP return (a year) |
|---|---|---|
| Bandhan Short Term Fund | 6.78% | 7.03% |
| ICICI Prudential Short Term Fund | 6.47% | 7.11% |
| Nippon India Short Term Fund | 6.35% | 6.87% |
| Category median | 6.17% | 6.68% |
SIP returns are annualised (XIRR) for ₹10,000 a month. They differ from lump-sum returns because each instalment buys at a different price.
Same rule, different crowns
4 different funds take the five measures below, which is the point: the answer depends on what you ask.
| Measure | Fund | Value |
|---|---|---|
| Best 1-year return | Bandhan Short Term Fund | 5.47% |
| Best 5-year return | ICICI Prudential Short Term Fund | 6.95% |
| Lowest expense ratio | Aditya Birla Sun Life Short Term Fund | 0.36% |
| Lowest volatility | UTI Short Term Fund | 0.9% |
| Highest Sharpe ratio | Bandhan Short Term Fund | 1.10 |
The spread between the first and sixth fund on 3-year return is under half a point a year. A gap that small can come from one credit holding or from a single month's rate move, so treat the top three as a group.
More in this series
Best large cap fund · Best mid cap fund · Best small cap fund · Best flexi cap fund · Best ELSS fund · Best aggressive hybrid fund · Best multi asset fund · Best large and mid cap fund · Best gilt fund
What this ranking cannot tell you
It looks backward over a single window. It ignores the fund house, the manager's tenure, the portfolio and its overlap with what you already own. Past returns do not predict future ones, and a fund's rank can change with the next month's NAV. For any fund here, open its page to see the full record, and use the compare tool to set two side by side. This is a data read-out, not advice to buy or sell.
Frequently asked questions
Which is the best short duration fund in India in 2026?
On this rule (open-ended, at least ₹1,000 crore AUM, a 5-year record, ranked by 3-year return, Direct plan, Growth option), Bandhan Short Term Fund, at 7.62% a year to 27 October 2026, against a category median of 7.20%. A different rule can give a different answer.
Does the best short duration fund by 3-year return also lead over 1 and 5 years?
Not entirely. Among the eligible funds, Bandhan Short Term Fund leads over one year at 5.47% and ICICI Prudential Short Term Fund leads over five years at 6.95%; Bandhan Short Term Fund returned 5.47% and 6.45%.
Which short duration fund has the lowest expense ratio?
Aditya Birla Sun Life Short Term Fund, at 0.36% for the Direct plan among the eligible funds. Bandhan Short Term Fund charges 0.39%.
This is commentary on published data, not investment advice. WealthTicker is not a SEBI-registered adviser or distributor. Figures are WealthTicker’s own calculations from public data — AMFI’s fund NAVs and disclosures, NSE’s index and FII/DII files, and the fund houses’ monthly portfolios (how we calculate). They are as of the dates stated and can be revised by their source.
Keep reading
Four biggest short duration funds compared in 2026
The four biggest short duration funds, compared on returns, calendar years, risk, SIP results and cost. 3-year range 7.07% to 7.49% a year.
Short duration funds trailed overnight funds in a year
The median short duration fund returned 4.96% in the year to 9 October 2026, below overnight (5.25%), liquid (6.50%) and ultra-short (6.55%) funds.
Ultra-short and low duration funds: 48 funds compared
To 6 October 2026 the median ultra-short fund returned 6.52% in a year and the median low duration fund 6.17%. Over three years the order flips.