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Best Credit Risk Mutual Funds

Credit risk mutual funds, as the name suggests, invest in instruments that carry higher credit risks. SEBI defines these funds as debt schemes investing in below the highest-rated corporate bonds. This category of debt funds invests at least 65 percent of their portfolio in lower than AA-rated securities. The best credit risk mutual funds have the potential to deliver high returns.

The interest risk is comparatively lower in these mutual funds as they invest for shorter durations. They have the potential to generate 2-3% higher returns compared to the risk-free papers based on the historical returns. These funds generate returns by earning interest on the securities held. Since credit risk funds invest after careful consideration, they also stand a chance to earn capital gains if the security of the low-rated invested securities is upgraded.

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Top 10 Credit Risk Mutual Funds

Fund NameCategoryRisk1Y ReturnsRatingFund Size(in Cr)
HDFC Credit Risk Debt Fund DebtHigh10.3%5star7,784
ICICI Prudential Credit Risk FundDebtHigh8.6%5star7,626
Kotak Credit Risk FundDebtHigh7.8%4star1,785
SBI Credit Risk FundDebtHigh7.9%4star3,473
Axis Credit Risk FundDebtHigh8.6%4star693
IDFC Credit Risk FundDebtModerate6.7%3star846
Baroda Pioneed Credit Risk FundDebtModerate14.3%3star200
L&T Credit Risk FundDebtModerately High7.3%3star202
Invesco India Credit Risk FundDebtModerate4.9%3star127
DSP Credit Risk FundDebtVery High6.5%3star271
PGIM India Credit Risk FundDebtModerate10.4%2star45
Nippon India Credit Risk FundDebtHigh16.3%2star1,008
IDBI Credit Risk FundDebtModerately High8.5%2star41
UTI Credit Risk FundDebtModerately High6.7%1star354
UTI Credit Risk FundDebtModerateN.Astar0
View All Top 10 Credit Risk Mutual Funds

Features of Credit Risk Mutual Fund

These mutual funds enable investors to seek higher returns by taking comparatively higher risks. Some of the best credit risk funds provide an opportunity for investors to expose their capital to lower-rated securities which have the potential to be upgraded. These funds serve as a viable investment option for investors looking to invest in debt funds.

They usually invest after careful consideration, but there is always a possibility that any of the invested securities are downgraded. This could result in the fund being unable to exit due to lack of liquidity. The downgrades can also result in capital losses, thereby impacting the investors’ portfolio.

Taxability

Credit risk funds fall under the debt fund category and are taxed accordingly. For funds that are held for a period of less than 36 months, a short-term capital gain tax as per the individual tax bracket would be applicable. If the mutual funds are held for over 36 months, a long-term capital gain tax of 20 per cent with indexation benefits will be levied. The dividends are tax-free, but a dividend distribution tax of 28.84 per cent will be applicable.

Who Are These Funds Suited For?

These funds are ideal for investors capable of taking strategic calls, time the market, and have a more aggressive approach. However, even the best credit risk mutual funds in India are not suitable for small retail investors who have a conservative investment approach. On the other hand, savvy investors who seek to diversify their portfolio further and earn higher returns can invest in these funds.

These mutual funds are medium to long-term investment bets, and investors with a corresponding investment horizon should invest in them. However, even the best performing funds have a chnace of running into liquidity risks if it were downgraded. Hence as an investor, you must also consider the liquidity aspects before investing.

Major Advantages

Credit risk funds enable investors with higher risk appetite to earn higher returns by investing in low-rated securities. Best credit risk funds come with the potential to capital gains if & when their security is moved up. This opens up an additional avenue for earning for these funds in India along with the regular interest income that is made on the securities that are held.

These mutual funds enable investors to earn returns by investing for a medium to long-term investment horizon. It also ensures that savvy investors have the right fund to expose their capitals to high-risk instruments which is otherwise difficult. It is worth noting that these mutual funds are a risky bet and investors should be cautious before investing.

Let's have a closer look

Now let us jump and check about these top 10 mutual fund schemes.

HDFC Credit Risk Debt Fund Direct Growth

Fund Performance: This fund has given 9.57% annualized returns in the last three years. In the last year, its returns were 10.3%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 10.3% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹5,000
AUM7,784Cr
1Y Returns10.3%

ICICI Prudential Credit Risk Fund Direct Plan Growth

Fund Performance: This fund has given 9.44% annualized returns in the last three years. In the last year, its returns were 8.62%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 8.62% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹100. Minimum SIP investment amount required for this scheme is ₹100.

Min Investment Amt₹100
AUM7,626Cr
1Y Returns8.6%

Kotak Credit Risk Fund Direct Growth

Fund Performance: This fund has given 8.24% annualized returns in the last three years. In the last year, its returns were 7.82%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 7.82% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹5,000
AUM1,785Cr
1Y Returns7.8%

SBI Credit Risk Fund Direct Growth

Fund Performance: This fund has given 8.12% annualized returns in the last three years. In the last year, its returns were 7.92%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 7.92% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹5,000
AUM3,473Cr
1Y Returns7.9%

Axis Credit Risk Fund Direct Growth

Fund Performance: This fund has given 7.65% annualized returns in the last three years. In the last year, its returns were 8.61%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 8.61% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹5,000
AUM693Cr
1Y Returns8.6%

IDFC Credit Risk Fund Direct Growth

Fund Performance: This fund has given 8.14% annualized returns in the last three years. In the last year, its returns were 6.69%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.69% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹5,000
AUM846Cr
1Y Returns6.7%

Baroda Credit Risk Fund Plan B Direct Growth

Fund Performance: This fund has given 5.81% annualized returns in the last three years. In the last year, its returns were 14.3%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 14.3% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹5,000
AUM200Cr
1Y Returns14.3%

L&T Credit Risk Fund Direct Growth

Fund Performance: This fund has given 4.93% annualized returns in the last three years. In the last year, its returns were 7.32%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 7.32% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹10,000. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹10,000
AUM202Cr
1Y Returns7.3%

Invesco India Credit Risk Fund Direct Growth

Fund Performance: This fund has given 2.91% annualized returns in the last three years. In the last year, its returns were 4.91%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 4.91% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹1,000. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹1,000
AUM127Cr
1Y Returns4.9%

DSP Credit Risk Direct Plan Growth

Fund Performance: This fund has given 2.78% annualized returns in the last three years. In the last year, its returns were 6.53%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.53% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹500. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹500
AUM271Cr
1Y Returns6.5%

PGIM India Credit Risk Fund Direct Growth

Fund Performance: This fund has given 3.6% annualized returns in the last three years. In the last year, its returns were 10.4%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 10.4% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹5,000
AUM45Cr
1Y Returns10.4%

Nippon India Credit Risk Fund Direct Growth

Fund Performance: This fund has given 3.59% annualized returns in the last three years. In the last year, its returns were 16.27%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 16.27% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹500. Minimum SIP investment amount required for this scheme is ₹100.

Min Investment Amt₹500
AUM1,008Cr
1Y Returns16.3%

IDBI Credit Risk Fund Direct Growth

Fund Performance: This fund has given -0.52% annualized returns in the last three years. In the last year, its returns were 8.51%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 8.51% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹5,000
AUM41Cr
1Y Returns8.5%

UTI Credit Risk Fund Direct Growth

Fund Performance: This fund has given -9.37% annualized returns in the last three years. In the last year, its returns were 6.72%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.72% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹5,000
AUM354Cr
1Y Returns6.7%

UTI Credit Risk Fund Segregated Portfolio 4 Direct Growth

Fund Performance: In the last year, its returns were NA. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing NA returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. .

Min Investment Amt₹5,000
AUM0Cr
1Y ReturnsNA

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