Short-, medium-duration funds should constitute bulk of your portfolio

Investors are increasingly favouring accrual-oriented debt funds like money market and short-duration funds over interest ratesensitive categories, according to data from the Association of Mutual Funds in India (Amfi).

- SARBAJEET K SEN

In June 2025, long duration (₹445.9 crore), medium to long duration (₹65.8 crore), mediumduration (61 crore), gilt (957.3 crore), and gilt with 10-year constant duration (141.8 crore) funds recorded net outflows. In contrast, short-duration funds and money market funds (MMFS) attracted strong inflows of ₹10,276 crore and ₹9,484 crore, respectively.

"Duration funds have seen net outflows as there is limited room for yields on the longer end to move lower from here. MMFS, on the other hand, have seen inflows on the back of surplus liquidity in the system," says Jalpan Shah, head of fixed income, TRUST Mutual Fund.

India's 10-year benchmark bond yield, which fell to 6.13 per cent on June 6, closed at 6.31 per cent on July 15. "Given that RBI rate cuts and the consequent rally in bonds is almost over, it makes sense for investors to prefer MMFS and short duration funds over interest rate-sensitive bond funds," says Joydeep Sen, corporate trainer (debt) and author.

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