He believes that the current interest rate environment and surplus liquidity make these funds favourable.
“India has now crossed $4 trillion in GDP, and the Reserve Bank of India (RBI) has turned accommodative, cutting the repo rate by 25 basis points each in February and April 2025,” Bisen noted.
Since December 2024, the RBI has been injecting liquidity, and its ₹2.69 lakh crore dividend payout has pushed core liquidity to an estimated ₹6.2 lakh crore.
This has resulted in a steeper yield curve, where shorter maturity yields are falling faster than long-term ones.
“That makes the 3-5 year segment attractive, while longer maturities between 10 and 30 years may see a flattening in yields,” said Bisen.
Debt mutual funds have already seen a sharp rise in investor interest.
According to AMFI data, the category reported a 20% growth in assets under management in FY25 so far, with inflows surging across short- and medium-term categories.
Investment choices continue to depend on the timeframe and risk appetite. For less than one year, money market and low-duration funds, which invest in very short-term debt, are preferred. Investors with 1-2-year timelines can consider short-term or corporate bond funds.
As RBI maintains its easing stance and market liquidity remains high, many experts believe that the current environment supports a strategic shift towards medium-duration debt funds.
(Edited by : Shoma Bhattacharjee)