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Overview
Corporate Bond Funds are debt mutual funds that predominantly invest in relatively high-rated corporate debt securities.
They can provide exposure to bonds issued by companies while maintaining a stronger credit-quality focus than Credit Risk Funds.
However, a high credit rating does not remove interest-rate, liquidity, spread, or default risk.
Explained
A Corporate Bond Fund is an open-ended debt mutual fund that predominantly invests in qualifying higher-rated corporate bonds.
The portfolio can include bonds issued by companies across different sectors.
Credit quality is a defining feature of the category.
Fund managers generally evaluate:
Explained
The fund manager invests primarily in bonds issued by companies that meet the category's credit-quality requirements.
A company issuing a bond promises to make specified payments according to the terms of the security.
The mutual fund receives those cash flows while the bond is held, but the bond's market value can change before maturity.
Returns can come from:
Suitability
Corporate Bond Funds may suit investors who:
They should not be treated as guaranteed-return investments simply because most portfolio bonds carry high credit ratings.
Advantages
The category predominantly invests in relatively high-rated corporate bonds. This distinguishes it from Credit Risk Funds, which deliberately maintain greater exposure to lower-rated corporate securities.
A fund can invest across several companies and sectors instead of relying on one corporate bond.
Fund managers analyse company finances and monitor changes in issuer creditworthiness.
Corporate issuers may offer higher yields than comparable government securities to compensate investors for additional credit and liquidity risk. This spread is not free return. It reflects risk.
The fund manager can choose securities across maturities within the scheme mandate.
Before you invest
High credit ratings are assessments, not guarantees. An issuer's financial condition can deteriorate, leading to rating downgrades and bond-price declines.
Corporate Bond Funds are not restricted to one narrow duration band. A fund holding longer-maturity corporate bonds can be significantly affected by changes in yields.
Corporate bond prices can decline even without a rating downgrade if market participants demand a larger yield premium over government securities.
Check whether a large percentage of the portfolio is invested in debt from a small number of companies or corporate groups.
Corporate debt exposure can cluster in areas such as financial services. Review sector concentration together with issuer concentration.
Even highly rated bonds can become difficult to trade during periods of market stress.
A higher portfolio YTM may look attractive, but the realised return can differ because of:
Taxation
Corporate Bond Funds invest predominantly in debt instruments and can fall within the Section 50AA definition of a Specified Mutual Fund where the applicable conditions are met.
For relevant units acquired on or after April 1, 2023, gains can be deemed short-term capital gains irrespective of holding period.
They are generally taxed at the investor's applicable income-tax rate.
Tax rules can change, and acquisition dates can matter.
Investors should verify their specific position before redemption.
Step by step
Good to know
It is a debt mutual fund that predominantly invests in qualifying higher-rated corporate bonds.
They may hold relatively high-rated debt, but they are not risk-free. Interest-rate, credit-spread, liquidity, and default risks remain.
Corporate Bond Funds focus predominantly on higher-rated corporate debt. Credit Risk Funds deliberately invest a substantial share of their portfolio in lower-rated corporate bonds.
Yes. Their market prices can change because of interest rates, liquidity, credit spreads, or changes in the issuer's perceived creditworthiness.
No. YTM is a portfolio metric and does not guarantee the return an investor will receive.
Where Section 50AA applies, gains on relevant units can be deemed short-term capital gains irrespective of how long the investor held them.
Recap
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FUND
Franklin India Corporate Bond Direct GrowthDebt Corporate Bond₹116.3
0.08%
6.43%
8.07%
6.75%
Baroda BNP Paribas Corporate Bond Fund Direct Plan Growth OptionDebt Corporate Bond₹31.39
0.07%6.03%
7.74%
6.23%
Axis Corporate Bond Fund Direct Monthly Reinvst of Inc Dis cum Cap WdrlDebt Corporate Bond₹10.19
0.1%5.72%
7.72%
6.76%
Nippon India Corporate Bond Fund Direct Plan Growth PlanDebt Corporate Bond₹67.21
0.11%5.55%
7.6%
6.8%
I
ICICI Prudential Corporate Bond Fund Direct Plan GrowthDebt Corporate Bond₹33.5
0.19%6.07%
7.51%
6.79%
Kotak Corporate Bond-Direct Plan-Growth OptionDebt Corporate Bond₹4199.22
0.12%5.38%
7.45%
6.47%
DSP Corporate Bond Direct GrowthDebt Corporate Bond₹17.49
0.01%6.14%
7.38%
6.03%
HSBC Corporate Bond Fund Direct Plan Growth PlanDebt Corporate Bond₹83.19
0.12%5.36%
7.34%
6.09%
UTI Corporate Bond Fund Direct GrowthDebt Corporate Bond₹17.87
0.12%5.41%
7.34%
6.31%
Bandhan Corporate Bond Fund Direct Plan Half Yearly Income Dis cum Cptl Wdrl OptDebt Corporate Bond₹11.9
0.07%5.85%
7.33%
6.15%
Franklin India Corporate Bond Direct Monthly Reinvestment Inc Dist cum Cap WdrlDebt Corporate Bond₹16.95
0.08%6.24%
7.99%
6.69%
Baroda BNP Paribas Corporate Bond Fund Direct Plan Annual Payout Inc Dist cum Cap WdrlDebt Corporate Bond₹12.58
0.07%6.03%
7.57%
6.04%
Axis Corporate Bond Fund Direct GrowthDebt Corporate Bond₹19.36
0.1%5.61%
7.65%
6.74%
Nippon India Corporate Bond Fund Direct Plan Weekly Reinvestment of Income Dis cum cptl wdrl PlanDebt Corporate Bond₹17.05
0.11%5.55%
7.6%
6.8%
SBI Corporate Bond Fund Direct Quarterly Reinvestment Inc Dist cum Cap WdrlDebt Corporate Bond₹16.54
0.12%5.15%
7.24%
6.26%
PGIM India Corporate Bond Fund Direct Plan GrowthDebt Corporate Bond₹51.09
0.12%4.97%
7.17%
6.27%
Invesco India Corporate Bond Fund Direct Discretionary Payout of Income Dist cum Capital WtdrlDebt Corporate Bond₹3616.89
0.17%4.83%
7.17%
6.08%
HDFC Corporate Bond Fund -Direct Plan - Growth OptionDebt Corporate Bond₹35.17
0.19%4.85%
7.12%
6.28%
UTI Corporate Bond Fund Direct Half Yearly Reinvestment Inc Dist cum Cap WdrlDebt Corporate Bond₹15.27
0.12%5.24%
7.25%
6.26%
Bandhan Corporate Bond Fund Direct Plan GrowthDebt Corporate Bond₹21.2
0.07%5.78%
7.29%
6.07%
Showing 1–20 of 96
