Best Sundaram Debt Mutual Funds

With over 24 years of experience in fund management, Sundaram Mutual Fund has a nationwide presence with over 88 branches. A subsidiary under Sundaram Finance Limited (SFL), the Sundaram AMC serves over 3.5 million investors in the country, managing assets worth more than Rs.40,000 crore. 

Sundaram Mutual offers over 55 mutual fund schemes, catering to the needs of investors with different reward, risk, and liquidity preferences. 

A debt mutual fund is one that invests in a range of debt instruments to insulate a portfolio against market volatility. The best Sundaram debt mutual funds can invest in various fixed income instruments like government securities, corporate bonds, treasury bills, debentures, deposit certificates, and money market instruments. Debt securities provide fixed incomes, which is predetermined along with their tenure at the time of issuance. 

Thus, debt funds comprising these securities offer steady capital appreciation. These are best suited for those looking for low risk with higher returns than a fixed deposit. 

Sundaram Debt Mutual Fund Categories

One can choose the best Sundaram debt mutual fund from the following categories.

Short duration funds: These invest in securities with maturity periods between 1 and 3 years. They involve low to moderate interest rates, credit, and inflation risks. The longer the maturities of the underlying securities, the greater is the extent of such risks. 

Ultra-short duration funds: Ultra-short duration funds allocate their assets to debt securities with maturity periods between 3 to 6 months. They primarily involve credit risks.

Corporate bond funds: These invest a minimum of 80% of their total assets in corporate bonds. The risk and return of the best Sundaram debt mutual funds in this category depend on the credit quality of such issuers. Usually, issuers with a AAA credit rating pose the least risk and deliver moderate returns. Conversely, issuers with C or poorer rating are the riskiest but with the potential to deliver significant returns. 

Money market funds: These debt funds invest in debt instruments to generate income from interest returns only. The underlying securities have a maturity of up to one year to offer more scope for capital gains. 

Banking and PSU funds: These invest most of their assets, around 80%, in debt securities of banks and PSUs. 

Overnight funds: Overnight funds typically invest in money market instruments with a maturity of 1 day. The best Sundaram debt mutual funds in this category involve minimal interest and credit risks. 

Medium duration funds: These invest in debt securities and money market with a Macaulay duration anywhere between three and four years.

Factors to Consider Before Investing

Sundaram Mutual Fund offers more than 5 debt fund schemes, spanning the aforesaid types. However, the discussion above may not be sufficient to select the best Sundaram debt mutual funds suiting you. Here are a few pointers to consider to that end:

Risks of debt funds: Debt funds are not as volatile as equity funds but pose more risks compared to FDs, though it’s minimal. They involve credit risks if the financial institution is unable to repay the principal and interest. They also come with interest rate risk due to changing market rates. While the interest rate risk depends on the maturities of the underlying securities, credit risk is premised on the credit ratings of issuers. It’d help if you assess these factors beforehand to select a suitable scheme.

Returns: The returns on the top Sundaram debt mutual funds are stable and predictable. However, the NAV (Net Asset Value) of these investments may change as the debt instruments are traded at secondary markets. This can result in higher or lower returns than fixed-income instruments. It’s prudent to take this matter into account to determine the amount to invest for desirable gains. 

Mutual fund loads: Per SEBI regulations, mutual funds are not permitted to charge an entry load. However, if someone were to exit a mutual fund scheme within a short period, one may need to pay an exit load. This is usually charged as a penalty for investors if they quit prematurely. 

Other charges: Besides a nominal transaction fee, the AMC and fund manager charges advisory fees, operational costs, legal/audit fees, services charges, etc. These expenses are charged annually as a percentage of the NAV and vary across schemes. Note that, expense ratio impacts your take-home returns. Therefore, consider comparing schemes based on their expense ratio to ensure you can maximise returns.

Past performance: The performance history of the best Sundaram debt mutual funds reflects the skills of fund managers associated with them. But, note that it’s not an indication of how a scheme will perform in the future.

Besides these, evaluate your investment goals before investing in a Sundaram mutual fund. 

The abovesaid are some of the ways an investor can determine the best Sundaram debt mutual funds 2023. By following these points, one can choose a financial scheme that best suits their needs. 

Taxability

After you have selected the best scheme of the lot, familiarise yourself with how earnings from it’ll be taxed. It’ll help you make better decisions regarding investments and liquidation.

Long-term Capital Gains Tax: For LTGC, investors can benefit from indexation when selling their debt funds. They have to pay 20% LTGC tax on profits after adjustment.  

Short-term Capital Gains Tax: Capital gains realised before a period of three years is known as STCG. Investors need to add the aggregate amount to their taxable income for a financial year. 

TDS: TDS does not apply to earnings from a debt fund.