List of the Top Ultra Short Term Funds in India (2025)
Ultra Short Term Funds are a category of debt mutual funds that invest in fixed income securities with very short durations, typically ranging from a few days to one year. They invest in highly liquid instruments like commercial papers, treasury bills, and certificates of deposit. Investors with a short-term investment horizon or those looking to park their funds for a few months explore Ultra Short Term Funds. Let’s explore some of the best ultra short term mutual funds in this article.
Best Ultra Short Duration Funds Based on 5Y CAGR
| Name | AUM (Rs. in cr.) | CAGR 5Y | CAGR 3Y | Expense Ratio(%) | Alpha | Volatility | NAV (₹ per unit) |
|---|---|---|---|---|---|---|---|
| Nippon India Ultra Short Duration Fund | 11075.99 | 7.48 | 7.73 | 0.38 | 0.11 | 0.38 | 4514.41 |
| UTI Ultra Short Duration Fund | 4204.46 | 6.72 | 7.49 | 0.33 | 0 | 0.35 | 4618.34 |
| ICICI Pru Ultra Short Term Fund Fund | 17076.56 | 6.45 | 7.63 | 0.39 | 0 | 0.38 | 30.45 |
| Aditya Birla SL Savings Fund | 21521.3 | 6.35 | 7.71 | 0.34 | 0 | 0.42 | 567.45 |
| Axis Ultra Short Duration Fund | 6763.84 | 6.31 | 7.64 | 0.38 | 0 | 0.37 | 15.88 |
| Tata Ultra Short Term Fund | 4610.86 | 6.20 | 7.59 | 0.28 | 0.14 | 0.35 | 15.13 |
| Baroda BNP Paribas Ultra Short Duration Fund | 1396.49 | 6.13 | 7.49 | 0.31 | 0.02 | 0.36 | 1586.63 |
| HDFC Ultra Short Term Fund | 17328.44 | 6.13 | 7.49 | 0.37 | 0.03 | 0.37 | 15.72 |
| DSP Ultra Short Fund | 3844.78 | 6.09 | 7.58 | 0.3 | 0.17 | 0.38 | 3760.85 |
| Mahindra Manulife Ultra Short Duration Fund | 207.03 | 6.07 | 7.49 | 0.28 | 0.09 | 0.35 | 1431.09 |
Disclaimer: Please note that the above list of the ultra short term mutual funds in india
is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Mutual Fund Screener and is subject to real-time updates.
Note: The data on the list of the best ultra short duration funds is from 29th September 2025. This data is derived from the Tickertape Mutual Funds Screener.
- 5Y CAGR: Sorted from Highest to Lowest
🚀 Pro Tip: You can use Tickertape’s Mutual Fund Screener to research and evaluate funds with over 50+ pre-loaded filters and parameters.
Overview of the Top Ultra Short Term Funds
Nippon India Ultra Short Duration Fund
Nippon India Ultra Short Duration Fund, launched on December 7, 2001, is managed by Nippon Life India Asset Management. The fund invests mainly in debt and money market instruments with a relatively short duration.
UTI Ultra Short Duration Fund
UTI Ultra Short Duration Fund, started on August 29, 2003, is managed by UTI Asset Management Company. The fund invests in debt and money market instruments and focuses on short to medium durations.
ICICI Prudential Ultra Short Term Fund
ICICI Prudential Ultra Short Term Fund, launched on May 3, 2011, is managed by ICICI Prudential Asset Management. The fund invests primarily in short-term debt instruments and money market assets.
Aditya Birla Sun Life Savings Fund
Aditya Birla Sun Life Mutual Fund launched the Aditya Birla Sun Life Savings Fund on April 16, 2003. The fund invests in a mix of short-term debt and money market instruments and has built a long track record in the Indian market.
Axis Ultra Short Duration Fund
Axis Asset Management introduced the Axis Ultra Short Duration Fund on September 10, 2018. The fund invests mainly in short-term debt securities and money market instruments.
Tata Ultra Short Term Fund
Tata Asset Management started the Tata Ultra Short Term Fund on January 22, 2019. The fund invests in debt and money market instruments with short durations and carries relatively low risk.
Baroda BNP Paribas Ultra Short Duration Fund
Baroda BNP Paribas Asset Management launched the Baroda BNP Paribas Ultra Short Duration Fund on June 1, 2018. The fund invests in short-duration debt instruments and money market assets.
HDFC Ultra Short Term Fund
HDFC launched the Ultra Short Term Fund on September 25, 2018. HDFC Asset Management manages this fund, which invests in short-term debt and money market instruments. As part of one of India’s largest asset management companies, the fund offers investors a reliable option in the ultra-short-term category.
DSP Ultra Short Fund
DSP introduced the Ultra Short Fund on November 1, 2004. DSP Investment Managers manage this fund, focusing on short-duration debt and money market instruments. With its long track record in the Indian market, the fund brings stability and consistency to investors seeking short-term opportunities.
Mahindra Manulife Ultra Short Duration Fund
Mahindra Manulife started the Ultra Short Duration Fund on January 1, 2013. Mahindra Manulife Investment Management manages this fund, investing in short-term debt and money market instruments while maintaining a sharp focus on liquidity.
What is Ultra Short Duration Mutual Fund?
Ultra Short Duration Mutual Funds are debt funds that invest in securities with maturities typically between 3 to 6 months. They aim to provide liquidity and reasonable market-related returns, with lower risk and higher liquidity, by investing in a debt and money market instruments portfolio.
Taxation on Ultra Short Term Funds
Ultra Short Term Funds are classified under debt mutual funds, and their taxation is governed by the same rules applicable to other debt funds. The tax treatment depends on the holding period of the investment.
| Capital Gains Tax | Holding Period | Tax Rate |
| Short-Term Capital Gains (STCG) | Less than 36 months | Taxed as per the investor’s income tax slab |
| Long-Term Capital Gains (LTCG) | More than 36 months | 20% with indexation benefit |
How to Invest in Ultra Short Term Funds?
You can easily start investing in Ultra Short Term Funds by following these steps:
- To invest in Ultra Short Term Funds, you can visit a mutual fund investment platform such as smallcase.
- The next step is to research and identify the best ultra short term funds that match your investment thesis. Tools like the Tickertape Mutual Fund Screener can help you filter and compare funds based on parameters such as returns, expense ratio, and fund size.
- Once you shortlist the funds, visit smallcase, log in, and search for the fund by name. You can then choose the investment mode, either a one-time lump sum or an SIP plan, and complete the process.
Features of an Ultra Short Duration Mutual Fund
- Short Duration: These funds primarily invest in debt instruments with a short maturity period, typically ranging from a few days to one year. This makes them ideal for investors looking to park their money for a short time.
- Returns: While these mutual funds take a conservative approach, they aim to provide somewhat higher returns than regular savings accounts. These returns are mostly derived from interest income earned by the underlying securities, as well as capital appreciation.
- Investment in Debt and Money Market Instruments: These funds allocate their assets across various debt securities and money market instruments to achieve their investment objectives.
Advantages of Investing in Ultra Short-Duration Mutual Funds
- Low Risk: These funds primarily invest in low-risk debt instruments such as treasury bills, commercial papers, and certificates of deposit, making them relatively safer compared to equity funds. However, returns can still be affected by market factors, interest rate changes, and credit risks, so they are not entirely risk-free.
- Suitable for Conservative Investors: Ultra short mutual funds may be a suitable option for investors with a low-risk appetite who are seeking stable returns over a short period. Keep in mind that while these funds are generally considered low-risk, they still carry some risks, particularly due to market conditions and interest rate fluctuations.
- Diversification: For investors already exposed to equity or other high-risk instruments, ultra short-duration funds can help provide diversification. Diversification can reduce the overall risk of an investment portfolio. However, it’s important to consider that market dynamics and economic changes can still impact the performance of these funds.
Risks of Investing in Ultra Short Term Funds in India
- Interest Rate Risk: Ultra Short Term Funds invest in debt instruments, which are sensitive to changes in interest rates. If interest rates rise, the value of the underlying debt securities may fall, potentially affecting the returns of the fund.
- Credit Risk: These funds invest in debt securities, including corporate bonds and commercial papers, which carry the risk of default. If the issuer of a debt instrument faces financial difficulty, it may fail to meet its payment obligations, leading to a reduction in the fund’s value.
- Reinvestment Risk: Ultra Short Term Funds invest in short-duration securities, and when these securities mature, the fund manager may need to reinvest the proceeds. If interest rates have dropped since the original investment, the new investments may offer lower returns.
- Market Risk: Like any mutual fund, Ultra Short Term Funds are still exposed to broader market risks, particularly in times of economic volatility. For instance, a significant market downturn or economic slowdown can negatively impact the performance of ultra short duration debt funds.
Factors to Consider While Investing in Ultra Short Term Funds
- Investment Horizon: Ultra Short Duration Funds typically focus on short-term investments, generally ranging from a few days to one year. These funds invest in debt instruments with shorter maturities, which may appeal to those looking to park funds for a limited time.
- Risk Tolerance: Low-risk short-term funds invest in debt securities and are generally less volatile than equity funds. However, they still carry risks related to interest rates and credit. Therefore, investors should assess their risk tolerance before opting for ultra short term funds.
- Credit Quality of Underlying Securities: The credit risk of short-term debt funds depends on the quality of the debt instruments held within the portfolio. These funds typically invest in a range of corporate bonds, treasury bills, and other debt securities, each carrying different levels of credit risk based on the issuer’s financial health.
- Interest Rate Outlook: Ultra short mutual funds are sensitive to changes in interest rates. As interest rates fluctuate, the value of the debt securities held by these funds can change. Rising rates, for instance, may lead to a reduction in the market value of existing securities.
- Expense Ratio: When considering ultra short duration debt funds, it’s important to review the expense ratio, which is the annual fee charged by the fund manager. A higher expense ratio can reduce the returns earned by investors, especially in funds with lower overall returns.
Who Should Invest in Ultra Short Term Funds?
- Investors with Short-Term Financial Goals: Ultra short term funds suit investments with a short-term horizon, typically from a few months up to one year. Investors saving for near-term goals, such as a vacation, an emergency fund, or other short-term expenses, may consider ultra short term funds.
- Risk-Averse Investors: Ultra short duration funds show less volatility than equity funds under favourable market conditions, making them suitable for risk-averse investors. These funds still carry some risk, especially from interest rate changes or credit risk.
- Investors Seeking Portfolio Diversification: Individuals with significant equity exposure can use ultra short duration funds to add debt securities to their portfolio, helping balance risk and diversify investments.
To Wrap It Up…
Ultra Short Duration Mutual Funds are a strategic investment choice for those seeking a low-risk option with liquidity and the potential for modest returns. However, they also carry risks, and under unfavourable circumstances may not generate the expected returns. Therefore, evaluating these funds and factors related to their performance can help investors make a more informed decision when considering ultra short term funds.
Looking for a Loan Against Mutual Funds (LAMF)? Explore LAMF on smallcase –
You can now apply for a loan against mutual funds (LAMF) on smallcase. Explore the quick and paperless process with the following articles about the eligibility criteria, documents required, features, benefits and more on LAMF at smallcase!
Frequently Asked Questions(FAQs) on Ultra Short-Term Funds
Ultra short-term mutual funds are debt funds that invest in short-duration securities like treasury bills and corporate bonds, with a maturity period usually under a year. They aim to offer low-risk, stable returns over a short period.
The best mutual fund for short-term investments depends on individual factors such as risk tolerance and investment goals. Ultra short-term fund is one of the short-term investment options, but it also carries risks related to interest rates and credit, which may affect returns.
Ultra short-term funds and fixed deposits (FDs) are both common investment choices, but they differ in terms of returns and risk. While FDs offer guaranteed returns with no risk, ultra short-term funds may provide higher returns but carry some level of risk.
Ultra short term fund returns can vary depending on market conditions and the specific securities in the fund’s portfolio.
Ultra Short Duration Mutual Funds are considered low-risk due to their short lending duration, but they carry slightly higher risk than liquid funds.
It varies from fund to fund. Some ultra short-term funds may charge an exit load if the units are redeemed within a specified holding period, while others may not. It’s important to check the specific terms and conditions of the fund before investing.
Ultra Short Duration Mutual Funds invest in debt and money market instruments with maturities ranging from 3 to 6 months, targeting financially strong borrowers and government securities.
Liquid funds and ultra short-term funds are both types of debt mutual funds that invest in short-term investments. However, liquid funds mainly invest in very short-term instruments, such as overnight deposits and treasury bills, which have a very short duration. On the other hand, ultra short-term funds invest in debt securities with slightly longer durations, usually up to one year.
