Gilt funds returned 3% in a year, half what liquid did

The number

Over the twelve months to 30 September 2026, the median gilt fund returned 3.02%. The median 10-year constant maturity gilt fund returned 3.08%.

Over the same year, the median liquid fund returned 6.46%. Funds that own long government bonds earned about half what funds that own three-month paper did.

Every figure here comes from daily NAVs as of 30 September 2026, Direct plan, Growth option. There are 23 gilt funds and 5 constant maturity funds in the count. Two gilt codes that are extra options of a scheme already counted, with near-identical NAVs, are left out.

A category, not a single result

Two things stand out.

The last three months were negative almost across the board. 22 of the 23 gilt funds and all five constant maturity funds lost money over the quarter. Only Franklin India Gilt Fund was positive, at 0.64%. A falling bond NAV means yields rose, and the longer a fund's bonds, the more it falls for a given rise.

The spread between gilt funds is wide. The best returned 7.87% over the year and the weakest 0.71%, a gap of 7.16 points among funds that all own the same issuer's bonds. The middle half of the category spans 1.43 points.

Why funds holding the same bonds differ

A gilt fund manager can own anything from short Treasury bills to 40-year bonds, and can change the mix at will. That choice of maturity, called duration, is the whole of the active bet. A manager who held longer bonds into a rise in yields lost more; one who shortened in time lost less.

A constant maturity fund cannot make that bet. It must keep its portfolio's maturity near ten years, so it is a cleaner read of what the bond market did. Even there the five funds spread from 1.78% (DSP) to 4.16% (Bandhan).

Costs are a small part of it. The median gilt fund's Direct-plan expense ratio was 0.50% at the end of September 2026, and the constant maturity funds' 0.31%. Bandhan's constant maturity fund charged the least of the five, at 0.26%, and DSP's 0.31%. That 0.05 points is a small share of the 2.38-point gap between them.

Gilt against liquid, over longer periods

The one-year comparison is not a fluke of a bad year. Over three years the median liquid fund compounded at 6.93% a year against the gilt fund's 6.28%. Over five years it was 6.36% against 5.57%.

Over all three periods, the median gilt fund paid less than the median liquid fund and was far bumpier. Its three-year volatility of 3.11% compares with 0.17% for liquid funds. Its median worst fall from a peak over three years was 3.58%.

That does not make gilt funds pointless. They are built to gain when yields fall, which these periods did not deliver much of. But "government bonds" does not mean "steady".

What this does not tell you

It is not a forecast of rates. A falling NAV over three months says yields rose. It does not say whether they will keep rising or reverse, and gilt returns turn on exactly that.

Past returns don't predict. The fund at the top of this table took a duration call that worked over this window. The same call can cost it in the next one.

Tax is at your slab. Gains in a debt fund bought after 1 April 2023 are taxed at your income-tax slab rate, however long you hold.

Where to go from here

The gilt fund and 10-year constant maturity gilt pages list every scheme with live figures. The guide to the debt fund duration ladder explains why maturity drives these results, and credit risk and YTM covers the yield side.

For the other end of the ladder, see liquid and overnight fund returns.