Dynamic bond funds returned 3.54% in a year to October

The August numbers did not hold

Our August look at dynamic bond funds found a median of 5.25% for the year to 7 August 2026. Two months later, in the year to 9 October, it is 3.54%.

Nothing was wrong with the earlier figure. A trailing year drops its oldest days and adds the newest, and the newest two months were bad ones for bonds: the median fund lost 0.49% in the last month and 0.22% over three. The category has no rule on duration, so its result depends on how much of the move a manager caught.

Figures are Direct plan, Growth option NAVs as of 9 October 2026, for 22 funds. Returns over a year are annualised.

The numbers

The pattern from August holds: dynamic bond sits between gilt and corporate bond funds on risk. What has changed is the return. On the medians, the corporate bond category was ahead of dynamic bond over one, three and five years, with half the volatility. Gilt funds were weakest over the year, with a median of 1.88%.

Five that beat the safer category

Five dynamic bond funds returned more than the corporate bond median of 4.47% over the year.

Bandhan's fund was top in August with 7.30% and is top again at 6.73%. It is also the most volatile fund in the category over three years, at 3.34% a year, and its worst fall was −4.06%. It is the only fund in the category above 6% for the year, but its path has been the roughest of the five.

Axis and Aditya Birla Sun Life look different. Their returns are lower than Bandhan's, but their worst falls, −1.26% and −1.09%, are shallower than the category median of −1.76%. Both were also in our August list of funds that beat the median in both halves of the year.

The other end

Union Dynamic Term returned −0.04% over the year, the only loss in the category. It was 2.18% in August. Its worst fall in three years, −4.92%, is the deepest of the 22 and its volatility, 3.28% a year, is second only to Bandhan's, a profile in line with holding long bonds, which gain most when yields fall and lose most when they rise.

Close behind it are DSP Dynamic Term (1.27%), Canara Robeco Dynamic Term (1.48%) and Baroda BNP Paribas Dynamic Term (1.80%).

The least volatile fund, Mirae Asset Dynamic Term, at 0.92% a year, returned 3.56% for the year: almost exactly the median. Low risk did not rescue its return, and it lost 0.89% in the last month, the third-weakest month in the category.

What this does not tell you

A dynamic fund is judged by its decisions, which we can't see. The NAV shows the result of the manager's duration calls, not the calls themselves. A good year can be luck.

The best one-year fund was also the riskiest. A return like Bandhan's may reflect a bet that paid off. Whether it repeats is not something the past year answers.

Credit is not in these numbers. Dynamic bond funds may hold corporate bonds, so part of a return can come from credit rather than duration.

Tax is at your slab. Gains in a debt fund bought on or after 1 April 2023 are taxed at your income-tax slab rate.

Where to go from here

The dynamic bond fund page lists every scheme, and dynamic bond funds explained covers how the duration call works. For the safer neighbour, see corporate bond funds this October, and for the riskier one, gilt funds this October.