Dynamic Bond Funds
Dynamic funds are sensitive to changes in interest rates. When interest rates rise, the value of existing bonds (which typically have fixed interest rates) decreases, leading to lower returns for debt funds. Conversely, when interest rates fall, the value of existing bonds increases, resulting in higher returns.
These funds are designed to adapt to changing interest rate environments. They can adjust their portfolio by investing more in long-term bonds when interest rates are falling (to benefit from higher future interest payments) and investing more in short-term bonds when interest rates are rising (to reduce the impact of declining bond prices). This flexibility allows dynamic mutual funds to potentially deliver steadier returns compared to traditional debt funds.
Best Dynamic Bond Mutual Funds
List of the top-performing Dynamic Bond Mutual Funds sorted by returns with their AUM and Expense Ratio.
What is the Dynamic Bond Fund?
Dynamic bond funds are a type of open-ended debt mutual fund that actively manages their portfolio by adjusting the allocation between short-term and long-term bonds based on market interest rate movements. This flexibility allows you to potentially capitalise on both rising and falling interest rate environments.
How Dynamic Bond Funds Work?
Dynamic funds are known for their ability to switch between short-term and long-term securities. This allows them to adapt to changing interest rate environments. The fund manager's expertise in predicting interest rate movements is crucial. If they anticipate a decline in interest rates, they may invest in long-term bonds to benefit from potential capital gains as bond prices rise. Conversely, if they expect interest rates to increase, they may shift to short-term bonds to avoid losses from falling bond prices.
By strategically shifting between different types of bonds and adjusting their portfolio based on interest rate expectations, dynamic debt funds aim to provide smoother returns and reduce the impact of interest rate fluctuations.
AUM Growth of Dynamic Bond Mutual Funds - December 2025
In the past one month, the SBI Dynamic Bond Fund Direct Growth has emerged as the leader in net AUM growth, witnessing an impressive addition of ₹191.58 crore. This positions it as one of the top-performing Dynamic Bond mutual funds in terms of investor interest and fund growth.
Fund | 1M Net Flow | 1M Net Flow % | |
|---|---|---|---|
 SBI Dynamic Bond Fund Current AUM: 4.96K Cr | +₹191.58 Cr | 4.78% | Invest |
 Baroda BNP Paribas Dynamic Bond Fund Current AUM: 201.33 Cr | +₹9.4 Cr | 4.35% | Invest |
 ICICI Prudential All Seasons Bond Fund Current AUM: 14.94K Cr | +₹5.95 Cr | 0.04% | Invest |
 Union Dynamic Bond Fund Current AUM: 108.29 Cr | +₹2.46 Cr | 2.30% | Invest |
 HSBC Dynamic Bond Fund Current AUM: 171.02 Cr | +₹1.72 Cr | 1.01% | Invest |
Top Stock added by Dynamic Bond Mutual Funds - December 2025
Over the last month, Indus Infra Trust Unit has been added to the portfolios of 1 out of 22 Dynamic Bond mutual funds. This signals growing confidence in the stock’s long-term growth prospects among Dynamic Bond fund managers.
Fund | 1M Net Flow | |
|---|---|---|
 Kotak Dynamic Bond Fund Added new position | +₹38.27 Cr | Invest |
Sector allocation of Dynamic Bond mutual funds - December 2025
Over the last 6 months, Dynamic Bond category has seen increased allocation towards Industrial, Consumer Cyclical, Financial Services sectors and allocation in Real Estate sectors has decreased
Sector | AUM |
|---|---|
 Financial Services Increased by 1.89%, in last 6M | 15.27K Cr |
 Consumer Cyclical Increased by 6.52%, in last 6M | 5.51K Cr |
 Basic Materials Increased by 0.00%, in last 6M | 4.82K Cr |
 Real Estate Decreased by 10.81%, in last 6M | 2.82K Cr |
 Industrial Increased by 1065.22%, in last 6M | 219.69 Cr |
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