Best Medium Duration Mutual Funds in India 2026: Top 10 & Guide
What Medium Duration mutual funds are, who should invest, key risks, and the top 10 funds with returns and risk data.
Medium duration funds are open-ended debt funds that invest so that the portfolio's duration is between 3 and 4 years. They carry the usual debt fund risks but can offer better returns than low duration funds. This guide covers who should invest, benefits, risks, and the top 10 medium duration funds from our data.
Key takeaways
- Medium duration funds are debt funds with a portfolio Macaulay duration of 3 to 4 years.
- They carry interest rate and credit risk but may return more than low duration funds.
- They suit moderate risk investors who can stay invested for 3 to 5 years.
- Selling early can lower unit value, and returns are not guaranteed.
- The top 10 funds below are ranked by an internal score, with return and risk numbers shown.
What are medium duration mutual funds?
Medium duration funds are open-ended debt funds mandated to invest in securities so that the portfolio's Macaulay duration is 3 to 4 years. They carry the inherent risks of debt funds but are known to provide better returns than low duration funds.
Who should invest in medium duration mutual funds?
- Medium risk appetite investors: interest rate and credit risk are present in these funds, at a moderate level.
- Investors with a medium horizon of 3 to 5 years, who can benefit from reasonably predictable returns, though not guaranteed.
What should you consider before investing?
- Financial objectives: tenure, aim and risk tolerance should match the fund.
- Credit ratings: too many low-rated holdings raise default risk, so check what the fund holds.
- Duration: invest only if your horizon fits the 3 to 4 year duration.
Advantages of medium duration mutual funds
- Lower risk than equity funds, which can help dilute a concentrated portfolio.
- Suitability for a mid-to-long-term approach when you want more than a bank deposit with less risk than equity.
- Two ways to invest: SIP or lump sum, with amounts varying by scheme.
Risks of medium duration mutual funds
- Costs: returns are lower than equity funds, so expense ratios and exit loads matter.
- No guaranteed return: these funds are sometimes wrongly thought of as risk-free, but they can fluctuate.
- Liquidity and early exit: selling early can reduce the value of your units.
How are Medium Duration mutual funds taxed?
Gains from Medium Duration funds are subject to tax on gains, with the rules depending on the type of debt fund and the date of purchase. The rates and holding-period rules depend on the fund type and can change, so check the current rules or speak to a tax advisor before you invest.
Top 10 Medium Duration mutual funds ranked by an internal score
These are the top 10 Medium Duration funds from our data, ranked by Invo Wealth's internal fund-quality score. The score itself is not shown, only the return and risk numbers behind it. A "--" means the fund has not completed that period or the data is unavailable.
Returns across 6 months to 5 years
Performance data as of 5 September 2026.
| Fund | 6M CAGR | 1Y CAGR | 3Y CAGR | 5Y CAGR |
|---|---|---|---|---|
| Aditya Birla Sun Life Medium Term Fund | 6.94% | 8.63% | 9.87% | 11.95% |
| ICICI Prudential Medium Term Fund | 7.54% | 7.27% | 7.87% | 6.74% |
| Nippon India Medium Term Fund (Existing Number of Segregated Portfolios - 1) | 5.65% | 5.92% | 7.90% | 6.28% |
| Axis Medium Term Fund | 6.40% | 6.46% | 7.79% | 6.68% |
| HSBC Medium Term Fund | 5.18% | 5.24% | 7.12% | -- |
| Kotak Medium Term Fund | 6.17% | 6.71% | 8.02% | 6.41% |
| SBI MEDIUM TERM FUND | 7.35% | 6.61% | 7.35% | 6.33% |
| HDFC Medium Term Fund | 6.56% | 6.29% | 7.27% | 6.10% |
| UTI Medium Term Fund | 4.52% | 4.76% | 6.36% | 6.00% |
| DSP Medium Term Fund | 5.12% | 4.93% | 7.00% | 5.90% |
Risk and consistency metrics
| Fund | ISIN | Volatility | Max drawdown (3Y) | Sortino ratio |
|---|---|---|---|---|
| Aditya Birla Sun Life Medium Term Fund | INF209K01603 | 2.83% | -0.65% | 2.74 |
| ICICI Prudential Medium Term Fund | INF109K01AH4 | 1.48% | -0.62% | 0.92 |
| Nippon India Medium Term Fund (Existing Number of Segregated Portfolios - 1) | INF204KA1PZ1 | 2.12% | -0.77% | 1.00 |
| Axis Medium Term Fund | INF846K01BP2 | 1.44% | -0.70% | 0.85 |
| HSBC Medium Term Fund | INF917K01TH0 | 1.49% | -0.59% | 0.12 |
| Kotak Medium Term Fund | INF174K01VL6 | 1.74% | -0.98% | 0.90 |
| SBI MEDIUM TERM FUND | INF200K01719 | 1.46% | -0.72% | 0.38 |
| HDFC Medium Term Fund | INF179K01913 | 1.41% | -0.65% | 0.29 |
| UTI Medium Term Fund | INF789FB1JU4 | 1.42% | -1.03% | -0.67 |
| DSP Medium Term Fund | INF740K01557 | 1.45% | -0.88% | 0.00 |
Look at volatility and drawdown carefully: longer-duration debt funds can fall noticeably when interest rates rise.
How to invest in Medium Duration mutual funds
You can invest in these funds using the Invo Wealth app. Sign up, get complete portfolio insights and start investing in mutual funds that actually suit you.
Conclusion
Medium duration funds suit investors with a 3 to 5 year horizon and moderate risk tolerance. Check credit quality, costs and your investment period before investing.
Frequently asked questions
What is a medium duration fund?
It is an open-ended debt fund mandated to invest in securities so that the portfolio's Macaulay duration is between 3 and 4 years.
Who can invest in medium duration funds?
Investors who can stay invested for at least 3 to 5 years and have moderate risk tolerance.
What are the main risks of medium duration funds?
Interest rate risk, because the holding period is more than a year, and credit risk, which is the risk of the issuer defaulting.
Are medium duration funds risk-free?
No. They are exposed to the market and can fluctuate, and returns are not guaranteed.
How can I invest in medium duration mutual funds?
You can invest through a SIP or a lump sum. To invest in these funds, you can use the Invo Wealth app: sign up, get portfolio insights and start investing.
Mutual fund investments are subject to market risks; read all scheme-related documents carefully. This article is for education only and is not investment advice. Past performance does not guarantee future returns. Invo Wealth is an AMFI-registered mutual fund distributor (ARN-368528).