The pattern: one-year returns step down with duration
Debt funds are supposed to be the calm part of a portfolio. Over the year to 22 October 2026, the calm depended heavily on how long the bonds a fund holds. Taking Direct Growth plans only (the original, non-IDCW code where two share a name), segregated portfolios excluded, the average one-year return fell almost in a straight line as duration lengthened.
| Category | Funds | Avg 1Y | Median 1Y | Worst | Best |
|---|---|---|---|---|---|
| Credit Risk | 12 | 7.78% | 6.74% | 4.91% | 16.89% |
| Floating Interest Rates | 12 | 5.32% | 5.47% | 4.25% | 6.03% |
| Medium Duration | 14 | 4.52% | 5.00% | 2.31% | 7.27% |
| Short Duration | 25 | 4.38% | 4.33% | 3.71% | 5.36% |
| Banking and PSU | 21 | 3.94% | 3.86% | 2.79% | 5.66% |
| Corporate Bond | 21 | 3.88% | 3.78% | 2.71% | 5.68% |
| Dynamic Bond | 23 | 2.54% | 2.48% | -1.26% | 6.43% |
| Medium to Long Term | 13 | 2.43% | 2.20% | 1.11% | 4.94% |
| Gilt | 28 | 1.24% | 0.81% | -1.76% | 6.97% |
| 10-year Constant Maturity Gilt | 5 | 0.86% | 0.79% | -0.48% | 1.88% |
| Long Term | 11 | -0.60% | -0.99% | -1.66% | 1.63% |
Source: WealthTicker fund metrics, NAVs as of 22 October 2026.
What the table says
The bottom of the table is the long end. A gilt fund or a 10-year constant maturity fund owns long government bonds, and its NAV moves with yields. When yields rise, those NAVs fall, and the year's returns for these categories average between 0.9% and 1.2%. Long Term funds, the longest of the group, averaged a loss.
The top of the table is different. Floating-rate, short and medium duration funds earned their accrual with little price swing; their worst fund still returned between 2.3% and 4.3%.
Credit risk is the outlier on the top row, and the average hides the story. The median (6.74%) is more than a point below the mean (7.78%) because one fund, Bank of India Credit Risk Fund, returned 16.89%. The next three, Aditya Birla Sun Life, DSP and Axis, returned 10.96%, 10.18% and 7.11%. A high return in this category is usually paid for in credit quality, which a one-year number does not show.
Three-year return and drawdown tell the same story
The one-year gap is wide, but over three years the categories sit closer together. Average three-year returns ranged from 5.84% (Long Term) to 9.45% (Credit Risk). The average worst fall over three years is where duration shows: about -0.5% to -0.9% for floating, short, medium and corporate bond funds, against -3.85% for gilt funds and -4.87% for Long Term funds.
| Category | Avg 3Y return | Avg worst 3Y fall |
|---|---|---|
| Floating Interest Rates | 7.47% | -0.53% |
| Short Duration | 7.24% | -0.56% |
| Corporate Bond | 7.04% | -0.75% |
| Dynamic Bond | 6.69% | -2.23% |
| Gilt | 6.05% | -3.85% |
| Long Term | 5.84% | -4.87% |
Reading it without over-reading it
- One year is one rate cycle. A category that lags here can lead in a year when yields fall. Inside gilt funds the spread was large: Bandhan Gilt Fund returned 6.97% and Union Gilt Fund -1.76%. That reflects different maturities, not only manager skill.
- Category names are loose. Two "gilt" funds can hold very different average maturities. The fund page's volatility and max drawdown are a better guide to rate sensitivity than the label.
- Sample sizes are small. Ten-year constant maturity has five funds and credit risk twelve; a single fund moves the average.
To see where a particular fund sits, open its page or filter debt categories on the screener. The overnight, liquid and money market comparison covers the short end this post leaves out, and how to read max drawdown explains the drawdown column.
This is commentary on the site's own data, not advice to buy or sell any fund.
Frequently asked questions
Which debt fund category returned the most over one year to 22 October 2026?
Credit risk funds, at an average of 7.78% across 12 Direct Growth funds. The median was lower at 6.74%, because Bank of India Credit Risk Fund (16.89%) pulled the average up.
Did any debt fund category lose money over the year?
Long-term funds averaged minus 0.60% across 11 funds, and the best of them returned only 1.63%. Several gilt and dynamic bond funds were also negative.
Are these figures after costs?
Yes. They are NAV-based returns of Direct Growth plans, so the expense ratio is already deducted. They are not a forecast.
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
Target-maturity debt index funds: 1-year returns by maturity
71 target-maturity index funds returned a median 5.59% (2026 maturities) down to 1.77% (2036) in the year to 16 Oct 2026; three-year medians are 6.8–7.6%.
Banking & PSU debt funds: 4.51% median, October 2026
The median banking and PSU debt fund returned 4.51% in the year to 9 October 2026 and 7.13% a year over three. UTI led at 5.98%; the range was 2.35 points.
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.