Short duration vs corporate bond funds: April 2026

Two categories, one comparison

Over the year to Monday 20 April 2026, the median short duration fund returned 5.79%. The median corporate bond fund returned 5.37%.

Both trailed the median liquid fund, which returned 6.34% over the same twelve months. For funds that hold longer bonds and are expected to earn more for it, that is the headline: a year in which stepping further out on the maturity ladder cost money.

All figures come from daily NAVs dated 20 April 2026, Direct plan, Growth option: 21 corporate bond funds, and 23 short duration funds, 22 of them old enough for a one-year figure.

Side by side

On almost every line the short duration funds are slightly ahead, with a little more return and a little less movement. The gap is small: 0.42 points over the year, or ₹4,200 on ₹10 lakh at the median.

The two categories measure different things

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 hold government bonds, bank paper or corporate bonds.

A corporate bond fund is defined by credit. At least 80% of it must sit in corporate bonds rated AA+ or higher, and nothing caps its duration.

So the comparison is less "short against long" than "a duration rule against a credit rule". A corporate bond fund can hold longer bonds than a short duration fund is allowed to, and the category's higher volatility, 1.04% against 0.87%, is consistent with that.

One bad quarter did most of the damage

The six-month and three-month figures can be split. Within each fund, the return from 20 October 2025 to 20 January 2026 is what is left of the six-month return after taking out the last three months.

The scaling compounds each three-month return over a 365-day year. In the three months to 20 January these funds earned at well under half their usual pace, and the corporate bond funds earned less than the short duration funds, as funds holding longer bonds would. No fund in either category lost money over that quarter, but none earned much. In the three months since, both have been back near 6% a year.

For a bond fund, a quarter of very low returns usually means bond prices fell enough to eat most of the interest: yields rose. The rebound since January suggests that has at least paused.

The ends of each category

Franklin's lead needs a footnote. Its NAV rose 1.31% on a single day, 28 April 2025, which falls inside this one-year window. Without that day its year would look close to the other leaders'. A one-day move that size is not ordinary interest income, and we have not traced its cause.

Bank of India Short Term has the same kind of footnote over five years: it shows 10.63% a year, far above any peer, and its NAV history holds one-day jumps of 15.06% on 31 March 2022 and 7.08% on 2 November 2022. Neither moves the category median.

The two corporate bond funds at the bottom also had the deepest falls from a peak over three years, 1.11% and 1.07%. In a year that punished longer bonds, the funds that dipped furthest earned least.

What this does not tell you

Credit quality is not in these numbers. A higher return can come from holding lower-rated paper. Read a fund's portfolio before its return.

Past returns don't predict. This ranking turns heavily on where yields went in one particular quarter.

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, however long you hold.

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 credit side.

For the longest bonds, see gilt fund returns to March. For the short end, see liquid fund returns to early March.