The number
The median short duration fund returned 4.96% over the year to 9 October 2026. A median overnight fund, which holds nothing longer than a day, returned 5.25% in the same year.
That is unusual. Short duration funds take interest-rate and credit risk in exchange for a higher return, and over three and five years that has held. Over the last twelve months it did not.
All figures are for the Direct plan, Growth option, computed from daily NAVs to 9 October 2026. Returns of a year or more are compounded annual rates. A discontinued fund and two with under a year of history are left out.
The ladder of debt categories
| Category | Funds | 1 year | 3 years a year | 5 years a year |
|---|---|---|---|---|
| Overnight | 35 | 5.25% | 6.04% | 5.74% |
| Liquid | 40 | 6.50% | 6.94% | 6.38% |
| Ultra short duration | 26 | 6.55% | 7.25% | 6.62% |
| Short duration | 22 | 4.96% | 7.48% | 6.44% |
Figures are category medians. Liquid and ultra-short funds sat well ahead for the year at about 6.5%. Short duration funds were the weakest of the four over one year and the strongest over three.
Where the year went
Splitting the year at 9 April 2026 shows when the shortfall happened:
| Median fund | 9 Oct 2025 to 9 Apr 2026 | 9 Apr to 9 Oct 2026 | Last month |
|---|---|---|---|
| Overnight | 2.62% | 2.56% | 0.41% |
| Short duration | 2.07% | 2.78% | -0.13% |
Short duration funds earned less than overnight in the first half, 2.07% against 2.62%. In the second half they moved ahead, 2.78% against 2.56%. The last month undid some of that: the median short duration fund lost 0.13%.
The likely reason is in the bond market. The Nifty 4-8 yr G-Sec Index, a rough proxy for the bonds these funds hold, fell 1.41% over the month to 9 October. It gained only 3.02% over the year, well below the 5.22% from the Nifty 1D Rate Index, which tracks overnight rates. When yields rise, bond prices fall, and a fund holding bonds of a few years' maturity feels it at once.
The funds
| Fund | 6 months | 1 year | 3 years a year | 5 years a year |
|---|---|---|---|---|
| Bandhan Short Term Fund | 3.32% | 5.82% | 7.86% | 6.52% |
| ICICI Prudential Short Term Fund | 2.92% | 5.57% | 7.77% | 7.10% |
| Mahindra Manulife Short Term Fund | 2.96% | 5.41% | 7.80% | 6.63% |
| Axis Short Term Fund | 2.94% | 5.37% | 7.80% | 6.78% |
| HDFC Short Term Fund | 2.69% | 4.99% | 7.48% | 6.56% |
| SBI Short Term Fund | 2.58% | 4.67% | 7.31% | 6.37% |
| Mirae Asset Short Term Fund | 2.59% | 4.49% | 7.35% | 6.39% |
Only four of the 22 funds beat the overnight median of 5.25% over the year; the other 18 were below it. The table shows the top four by one-year return and three larger houses for reference. The full spread in one-year return is 1.33 percentage points.
Over three years the funds are tighter: from 7.06% (Canara Robeco Short Term Fund) to 7.86% (Bandhan Short Term Fund), a gap of 0.8 points. Rank order shifts from year to year, so a single year's top place says little about the next.
What to take from it
A short duration fund is not a savings account with a bit more yield. It is a bond fund, and a month like the last one shows the price risk that sits behind the higher three-year average. The right comparison is the time you expect to hold it: its record is built on holding for two to three years.
For the funds on either side, see ultra short and low duration fund returns and corporate bond fund returns. The older short duration vs corporate bond funds post explains the difference in what they hold, and the screener can filter the category by return and cost.
Frequently asked questions
What have short duration funds returned over the last year?
The median short duration fund (Direct plan, Growth option) returned 4.96% in the year to 9 October 2026, across 22 funds. The range ran from 4.49% (Mirae Asset Short Term Fund) to 5.82% (Bandhan Short Term Fund).
Why did short duration funds earn less than overnight funds?
Short duration funds hold bonds that lose value when yields rise, and the Nifty 4-8 yr G-Sec Index fell 1.41% in the month to 9 October 2026. The median short duration fund lost 0.13% over that month, while the median overnight fund gained 0.41%.
Are short duration funds still better over longer periods?
Yes, in this data. Over three years the median short duration fund returned 7.48% a year against 6.04% for overnight and 6.94% for liquid funds. Over five years it was 6.44% against 5.74% and 6.38%.
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
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.
Medium and long duration debt funds: 36 funds compared
To 6 October 2026 the median medium duration fund returned 5.82% in a year, medium to long 3.65% and long duration 0.93%. Liquid funds made 6.47%.
Short duration vs corporate bond funds in 2026
In the year to 30 September 2026, the median short duration fund returned 5.26% and the median corporate bond fund 4.95%, with lower volatility too.