Gilt funds gained 2.58% in the three months to July

Four months on

In March, gilt funds were having a poor year: the median had returned 2.55% over the twelve months to 20 March, and just 0.19% over the last three of them. Bonds of 15 years and longer had lost money over the year.

Four months later the median gilt fund has returned 2.85% since that 20 March NAV, and 2.58% in the three months to Friday 17 July alone. Every one of the 23 funds is positive over those three months.

Those are absolute returns, not annual rates. Scaled up by compounding over 365 days, 2.58% in 91 days is about 10.8% a year: a pace no gilt fund comes near over any longer window. Short bursts like this are how gilt returns arrive.

All figures are computed from daily NAVs dated 17 July 2026, Direct plan, Growth option, for 23 gilt funds (two duplicate option codes left out) and five 10-year constant maturity funds. The index figures are NSE closing levels on the same day and include interest.

The order turned over

In the year to March, the shorter the bonds, the better the return. Since March the longest bonds have gained the most. The 15-year-plus index went from last to first.

It was not a straight line. The composite index fell another 2.2% from 20 March to its low on 2 April, recovered, dipped again in May, and rose strongly through June. From 22 May to 30 June the 15-year-plus index gained 4.74%. In bond terms, long yields came down after rising for most of the previous year.

The 10-year benchmark index lagged both ends since March. Its clean price, which strips out interest, is still 0.41% below where it stood on 20 March, so almost all of its 1.87% gain was interest.

The funds

The one-year figure barely moved from March, 2.55% to 2.92%, because the year now drops a strong spring in 2025, when the composite index gained 3.61% from 20 March to 17 July, and adds this spring's recovery. The change is in the short windows.

14 of the 23 gilt funds now beat the 10-year benchmark index over a year. In March, only 2 of 22 did.

New leaders

Two of the three funds that led in March, Franklin's and UTI's, have gained less than the median since and sit in the bottom third. In March their low volatility went with holding up well. A fund that moves little in a fall tends to move little in a rally too.

Bandhan's fund is the opposite case. It was in the middle of the table in March and is now first by more than two points, with the biggest gain since March of any gilt fund. Its three-year volatility, 3.50%, is among the higher ones in the category.

Next to liquid funds

Over three months the median gilt fund's 2.58% beat the median liquid fund's 1.59%. Over the year to mid-July it is the other way round, 2.92% against 6.36%. Gilt funds can make up a year of lag in a quarter, and lose it again just as fast.

What this does not tell you

It is not a rate forecast. Four good months say long yields fell. They don't say where yields go next.

Past returns don't predict. The fund that leads now made a duration call that worked for these months.

Short-window scaling exaggerates. A 10.8% annual pace from one strong quarter is arithmetic, not an expectation.

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 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 long bonds swing most.

For the March picture this post updates, see gilt fund returns in March. For the bond categories in between, see banking and PSU debt funds in June.