The number
Over the twelve months to 30 September 2026, the median short duration fund returned 5.26%. The median corporate bond fund returned 4.95%.
The short duration funds also moved less along the way. Over three years their median volatility was 0.97%, against 1.15% for corporate bond funds.
All figures come from daily NAVs as of 30 September 2026, Direct plan, Growth option: 21 corporate bond funds, and 24 short duration funds, of which 22 are old enough for one- and three-year figures.
Side by side
| Short duration | Corporate bond | |
|---|---|---|
| 3 months, median | 0.70% | 0.55% |
| 1 year, median | 5.26% | 4.95% |
| 1 year, range | 4.91% to 6.18% | 4.02% to 6.01% |
| 3 years, a year (median) | 7.39% | 7.20% |
| 3 years, range | 6.98% to 7.71% | 6.66% to 7.96% |
| 5 years, a year (median) | 6.43% | 6.24% |
| Volatility, 3 years (median) | 0.97% | 1.15% |
| Worst fall from a peak, 3 years (median) | −0.53% | −0.63% |
| Direct expense ratio (median) | 0.37% | 0.34% |
On almost every line the short duration funds come out slightly ahead: a little more return, a little less movement, and shallower dips. The corporate bond funds are a little cheaper to own.
The differences are small. At the median, 0.31 points over the year is ₹3,100 on ₹10 lakh.
They are defined on different axes
The two categories are easy to confuse, and they overlap in what they own.
A short duration fund is defined by maturity. SEBI requires its Macaulay duration, roughly the average time to get the money back, to stay between one and three years. It can own government bonds, bank paper or corporate bonds of any rating.
A corporate bond fund is defined by credit. It must keep at least 80% of its assets in corporate bonds rated AA+ or higher, but nothing limits its duration.
So a corporate bond fund can sit at a longer duration than a short duration fund is allowed. In a year when bond yields rose late, the longer one carries more risk of a fall. The three-month figures point that way: two corporate bond funds, Aditya Birla Sun Life and HDFC, were slightly negative over the quarter. No short duration fund was.
The ends of each category
| Fund | Category | 1 year | 3 years, a year |
|---|---|---|---|
| Bandhan Short Term Fund | Short duration | 6.18% | 7.71% |
| DSP Corporate Bond Fund | Corporate bond | 6.01% | 7.39% |
| ICICI Prudential Short Term Fund | Short duration | 5.99% | 7.71% |
| Franklin India Corporate Bond Fund | Corporate bond | 5.99% | 7.96% |
| Invesco India Short Term Fund | Short duration | 4.91% | 7.22% |
| HDFC Corporate Bond Fund | Corporate bond | 4.24% | 6.90% |
| Union Corporate Bond Fund | Corporate bond | 4.02% | 6.85% |
The best fund in each category is close to the best in the other. The difference between the categories is mostly in the weaker half: the bottom of the corporate bond list sits nearly a point below the bottom of the short duration list.
One five-year figure needs a warning. Bank of India Short Term Fund shows 10.82% a year over five years, far above any peer. A figure that far from its peers usually points to a one-off in the NAV history, such as money recovered on a bond that had earlier been written down, rather than ordinary holdings. We have not traced its cause, and it does not move the category median.
Both trailed liquid funds this year
The median liquid fund returned 6.46% over the same twelve months, ahead of both. Over three years the order flips: liquid funds compounded at 6.93% a year, below the short duration funds' 7.39% and the corporate bond funds' 7.20%.
That is consistent with longer bond yields rising during the year. Funds holding longer bonds give up some of their extra income to falling prices, and the cost shows in the short window before it washes out of the longer ones.
What this does not tell you
Credit quality is not in these numbers. A higher return can come from holding lower-rated paper, which looks fine until a default. Read a fund's portfolio before reading its return.
Past returns don't predict. The ranking depends heavily on where yields went in this particular year.
Tax is at your slab. Gains in a debt fund bought after 1 April 2023 are taxed at your income-tax slab rate.
Where to go from here
The short duration and corporate bond pages list every scheme. The guide to the debt fund duration ladder explains how maturity drives returns, and credit risk and YTM covers the other axis.
For the longest-duration end of the debt market, see what gilt funds returned this year.
Frequently asked questions
Which did better in 2026, short duration or corporate bond funds?
Short duration funds, narrowly. Over the year to 30 September 2026 the median Direct Growth short duration fund returned 5.26% against 4.95% for the median corporate bond fund. Over three years the medians were 7.39% and 7.20% a year.
What is the difference between a short duration fund and a corporate bond fund?
SEBI defines them on different axes. A short duration fund must keep its portfolio's Macaulay duration between one and three years, whatever it owns. A corporate bond fund must put at least 80% into corporate bonds rated AA+ or higher, with no duration limit.
Are these funds riskier than liquid funds?
They move more. The median three-year volatility was 0.97% for short duration funds and 1.15% for corporate bond funds, against 0.17% for liquid funds. Over the last year both categories also returned less than liquid funds, whose median was 6.46%.
This is commentary on published data, not investment advice. WealthTicker is not a SEBI-registered adviser or distributor. Figures are as of the dates stated and can be revised by their source.
Keep reading
Arbitrage funds vs liquid funds: the 2026 scorecard
The median arbitrage fund returned 6.68% in the year to 30 September 2026, against 6.46% for liquid funds. Where each came out ahead, and what it cost.
Balanced advantage funds in 2026's falling market
The Nifty 50 fell 13.4% from 31 December 2025 to 30 September 2026. The median balanced advantage fund lost 1.7%, and its worst dip was 8.7%.
Gilt funds returned 3% in a year, half what liquid did
The median gilt fund returned 3.02% in the year to 30 September 2026, against 6.46% for liquid funds. The spread between gilt funds was over 7 points.