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)
Sundaram Short Term Credit Risk FundDebtModerately Low-5.3%5star172
ICICI Prudential Credit Risk FundDebtModerate10.1%5star11,364
Kotak Credit Risk FundDebtModerately Low10.1%5star4,815
HDFC Credit Risk Debt Fund DebtModerate9.6%4star14,625
Franklin India Credit Risk Fund DebtModerate5.5%4star6,624
SBI Credit Risk FundDebtModerate7.1%4star5,155
Baroda Pioneed Credit Risk FundDebtModerate3.5%4star699
Aditya Birla Sun Life Credit Risk FundDebtModerate3.2%4star5,904
IDFC Credit Risk FundDebtModerate10.0%4star1,394
UTI Credit Risk FundDebtModerate-3.7%3star2,244
Reliance Credit Risk FundDebtModerate2.6%3star6,067
L&T Credit Risk FundDebtModerate3.0%3star1,981
Axis Credit Risk FundDebtModerate5.9%3star1,337
DSP BlackRock Credit Risk FundDebtModerate0.9%2star1,649
Principal Credit Risk FundDebtModerate0.9%2star45
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.

Sundaram Short Term Credit Risk Fund Direct Growth

Fund Performance: This fund has given 3.21% annualized returns in the last three years. In the last year, its returns were -5.32%. 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 -5.32% 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
AUM172Cr
1Y Returns-5.3%

ICICI Prudential Credit Risk Fund Direct Plan Growth

Fund Performance: This fund has given 8.29% annualized returns in the last three years. In the last year, its returns were 10.12%. 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 10.12% 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
AUM11,364Cr
1Y Returns10.1%

Kotak Credit Risk Fund Direct Growth

Fund Performance: This fund has given 7.85% annualized returns in the last three years. In the last year, its returns were 10.06%. 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 10.06% 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
AUM4,815Cr
1Y Returns10.1%

HDFC Credit Risk Debt Fund Direct Growth

Fund Performance: This fund has given 7.3% annualized returns in the last three years. In the last year, its returns were 9.63%. 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 9.63% 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
AUM14,625Cr
1Y Returns9.6%

Franklin India Credit Risk Fund Direct Plan Growth

Fund Performance: This fund has given 7.47% annualized returns in the last three years. In the last year, its returns were 5.45%. 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 5.45% 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
AUM6,624Cr
1Y Returns5.5%

SBI Credit Risk Fund Direct Growth

Fund Performance: This fund has given 6.97% annualized returns in the last three years. In the last year, its returns were 7.12%. 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 7.12% 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
AUM5,155Cr
1Y Returns7.1%

Baroda Credit Risk Fund Plan B Direct Growth

Fund Performance: This fund has given 6.44% annualized returns in the last three years. In the last year, its returns were 3.51%. 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 3.51% 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
AUM699Cr
1Y Returns3.5%

Aditya Birla Sun Life Credit Risk Fund Direct Growth

Fund Performance: This fund has given 6.24% annualized returns in the last three years. In the last year, its returns were 3.21%. 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 3.21% 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
AUM5,904Cr
1Y Returns3.2%

IDFC Credit Risk Fund Direct Growth

Fund Performance: This fund has given NA annualized returns in the last three years. In the last year, its returns were 9.97%. 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 9.97% 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
AUM1,394Cr
1Y Returns10.0%

UTI Credit Risk Fund Direct Growth

Fund Performance: This fund has given 3.32% annualized returns in the last three years. In the last year, its returns were -3.67%. 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 -3.67% 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
AUM2,244Cr
1Y Returns-3.7%

Nippon India Credit Risk Fund Direct Growth

Fund Performance: This fund has given 5.53% annualized returns in the last three years. In the last year, its returns were 2.65%. 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 2.65% 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
AUM6,067Cr
1Y Returns2.6%

L&T Credit Risk Fund Direct Growth

Fund Performance: This fund has given 5.33% annualized returns in the last three years. In the last year, its returns were 2.96%. 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 2.96% 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
AUM1,981Cr
1Y Returns3.0%

Axis Credit Risk Fund Direct Growth

Fund Performance: This fund has given 6.56% annualized returns in the last three years. In the last year, its returns were 5.87%. 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 5.87% 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
AUM1,337Cr
1Y Returns5.9%

DSP Credit Risk Direct Plan Growth

Fund Performance: This fund has given 3.15% annualized returns in the last three years. In the last year, its returns were 0.94%. 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 0.94% 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
AUM1,649Cr
1Y Returns0.9%

Principal Credit Risk Fund Direct Growth

Fund Performance: This fund has given 5.21% annualized returns in the last three years. In the last year, its returns were 0.86%. 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 0.86% 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 ₹2,000.

Min Investment Amt₹5,000
AUM45Cr
1Y Returns0.9%

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