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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)
ICICI Prudential Credit Risk FundDebtHigh9.9%5star7,217
HDFC Credit Risk Debt Fund DebtHigh11.2%5star7,253
Kotak Credit Risk FundDebtHigh8.4%4star1,803
IDFC Credit Risk FundDebtModerate8.2%4star813
SBI Credit Risk FundDebtHigh9.5%4star3,524
Axis Credit Risk FundDebtHigh9.4%4star593
Mahindra Manulife Credit Risk FundDebtModerate6.0%4star139
Principal Credit Risk FundDebtModerate12.3%3star14
Baroda Pioneed Credit Risk FundDebtModerately High11.4%3star180
L&T Credit Risk FundDebtModerate7.1%3star227
Invesco India Credit Risk FundDebtModerate8.1%3star129
DSP Credit Risk FundDebtVery High5.0%3star283
PGIM India Credit Risk FundDebtVery High7.6%2star46
Nippon India Credit Risk FundDebtVery High9.0%2star1,045
IDBI Credit Risk FundDebtModerately High11.6%2star38
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.

ICICI Prudential Credit Risk Fund Direct Plan Growth

Fund Performance: This fund has given 9.07% annualized returns in the last three years. In the last year, its returns were 9.94%. 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 9.94% 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
AUM7,217Cr
1Y Returns9.9%

HDFC Credit Risk Debt Fund Direct Growth

Fund Performance: This fund has given 8.77% annualized returns in the last three years. In the last year, its returns were 11.24%. 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 11.24% 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
AUM7,253Cr
1Y Returns11.2%

Kotak Credit Risk Fund Direct Growth

Fund Performance: This fund has given 7.91% annualized returns in the last three years. In the last year, its returns were 8.43%. 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 8.43% 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
AUM1,803Cr
1Y Returns8.4%

IDFC Credit Risk Fund Direct Growth

Fund Performance: This fund has given 7.81% annualized returns in the last three years. In the last year, its returns were 8.18%. 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 8.18% 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
AUM813Cr
1Y Returns8.2%

SBI Credit Risk Fund Direct Growth

Fund Performance: This fund has given 7.75% annualized returns in the last three years. In the last year, its returns were 9.53%. 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 9.53% 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
AUM3,524Cr
1Y Returns9.5%

Axis Credit Risk Fund Direct Growth

Fund Performance: This fund has given 7.32% annualized returns in the last three years. In the last year, its returns were 9.4%. 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 9.4% 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
AUM593Cr
1Y Returns9.4%

Mahindra Manulife Credit Risk Fund Direct Growth

Fund Performance: In the last year, its returns were 6.05%. 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 6.05% 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 ₹500.

Min Investment Amt₹1,000
AUM139Cr
1Y Returns6.0%

Principal Credit Risk Fund Direct Growth

Fund Performance: This fund has given 6.62% annualized returns in the last three years. In the last year, its returns were 12.3%. 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 12.3% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹2,00,000. Minimum SIP investment amount required for this scheme is ₹2,000.

Min Investment Amt₹2,00,000
AUM14Cr
1Y Returns12.3%

Baroda Credit Risk Fund Plan B Direct Growth

Fund Performance: This fund has given 5.74% annualized returns in the last three years. In the last year, its returns were 11.42%. 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 11.42% 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
AUM180Cr
1Y Returns11.4%

L&T Credit Risk Fund Direct Growth

Fund Performance: This fund has given 4.68% annualized returns in the last three years. In the last year, its returns were 7.07%. 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 7.07% 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
AUM227Cr
1Y Returns7.1%

Invesco India Credit Risk Fund Direct Growth

Fund Performance: This fund has given 2.81% annualized returns in the last three years. In the last year, its returns were 8.14%. 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 8.14% 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
AUM129Cr
1Y Returns8.1%

DSP Credit Risk Direct Plan Growth

Fund Performance: This fund has given 2.65% annualized returns in the last three years. In the last year, its returns were 5.03%. 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 5.03% 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
AUM283Cr
1Y Returns5.0%

PGIM India Credit Risk Fund Direct Growth

Fund Performance: This fund has given 3.43% annualized returns in the last three years. In the last year, its returns were 7.59%. 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 7.59% 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
AUM46Cr
1Y Returns7.6%

Nippon India Credit Risk Fund Direct Growth

Fund Performance: This fund has given 1.28% annualized returns in the last three years. In the last year, its returns were 8.96%. 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 8.96% 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
AUM1,045Cr
1Y Returns9.0%

IDBI Credit Risk Fund Direct Growth

Fund Performance: This fund has given -0.99% annualized returns in the last three years. In the last year, its returns were 11.62%. 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 11.62% 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
AUM38Cr
1Y Returns11.6%

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