Medium to Long Duration Mutual Funds

A medium to long duration fund is a debt fund that keeps its portfolio's Macaulay duration between 4 and 7 years in normal times. Debt means loans. This fund makes them by buying bonds and similar paper issued by governments, banks and companies.

SEBI's description of the category reads: “... such that the Macaulay duration of the portfolio is between 4 to 7 years.” A second line adds: “Portfolio Macaulay duration under anticipated adverse situation is 1 year to 7 years”.

Macaulay duration is the average number of years until the fund gets a bond's payments back, with each payment weighted by its value today. SEBI uses it to score interest-rate risk: the chance that a move in rates shifts the value of the bonds in the fund. The debt funds guide covers the idea in more detail.

The name has changed too. In February 2026 SEBI renamed the category Medium to Long Term Fund. Schemes already running had until 26 August 2026 to adopt new names.

A few general debt rules also apply:

• a tenth of the fund, or more, held as cash, treasury bills, government securities or repo on them (short loans backed by government paper);
• a 20% ceiling on any single sector, with government securities and some other holdings exempt;
• no maturity limit on each bond from the category rule. The band applies to the portfolio as a whole.

These are open-ended funds. You may redeem, or sell your units back to the fund, whenever you like. No lock-in, a period during which you cannot sell at all, applies.

SEBI's riskometer gives every portfolio duration above 4 years the same top interest-rate score, 6 out of 6. On that part of the formula, a 5-year portfolio and a 12-year portfolio score alike.

The riskometer is SEBI's compulsory risk label, with six levels from Low to Very High. For debt, the formula rates the portfolio on three risks, then takes their average:

• interest-rate risk, scored from duration. Over 3 to 4 years scores 5; anything over 4 scores 6;
• credit risk, the risk that a borrower is late or never repays. Government securities and AAA-rated paper score 1, and lower ratings score more;
• liquidity risk, the risk of not being able to sell a holding fast at a fair price. When this score beats the average of the three, it replaces it.

Take a fund holding only government securities or AAA paper. The average is (1 + 6 + 1 or 2) ÷ 3, which lands between about 2.7 and 3. That maps to Moderate, the third of six levels.

On 29 September 2026, most of the listed funds in this category read Moderate, and the rest read Moderately High. The interest-rate part scores the same for all of them in their normal band, so the gap comes from credit and liquidity. The medium duration funds page looks at credit quality more closely.

What the label cannot show is how far past 4 years a fund goes. For that, you need SEBI's band of 4 to 7 years and the fund's own duration figure.

SEBI's investor website states the link with interest rates plainly. Bond prices tend to fall as rates rise, and to climb as rates drop. A fund's value moves with its bonds' prices, and SEBI scores a longer duration as a higher interest-rate risk.

Each fund re-checks its level monthly and must publish it within 10 days of month-end.

In normal times the fund may sit anywhere from 4 to 7 years. In adverse conditions it may drop to as little as 1 year. Two funds in this category can be three years apart in duration and both still follow SEBI's rule.

The drop below 4 years is the fund manager's call. SEBI's note lets the manager cut duration “in case he has a view on interest rate movements in light of anticipated adverse situation”. SEBI does not define an adverse situation. It sets no time limit on one either.

The cut does bring paperwork. The fund house must write down its reasons and share them with the trustees when they next meet. Trustees are a separate company holding the fund's money and investments on your behalf. They check that the fund house follows SEBI's rules.

SEBI requires Macaulay duration to be stated for the portfolio as a whole. Each month the fund publishes its full portfolio, and debt funds publish it every fortnight as well. Fund factsheets usually show the portfolio's Macaulay duration.

The Potential Risk Class (PRC) grid adds one more clue. SEBI places every debt scheme in one of nine cells: rows cap duration, columns cap credit risk. This fund's normal band starts above the 1-year and 3-year ceilings of Class I and Class II. So it lands in the grid's bottom row, Class III, where any duration is allowed. The fund house picks the credit column.

The three sit next to each other on SEBI's duration scale: 3 to 4 years, then 4 to 7, then above 7.

• Medium duration, now the Medium Term Fund: 3 to 4 years normally, 1 to 4 in adverse conditions. Our suggested horizon is 3 to 4 years or more.
• Medium to long duration, now the Medium to Long Term Fund: 4 to 7 years normally, 1 to 7 in adverse conditions. Our suggested horizon is 4 years or more.
• Long duration, now the Long Term Fund: above 7 years, with no upper limit and no lower band for bad times. Our suggested horizon is 7 years or more.

Those horizons are Koshex's suggestions, not SEBI rules.

The riskometer does not line up neatly with the bands. On 29 September 2026, the most common level among listed medium duration funds was Moderately High. Listed long duration funds all read Moderate that day. A shorter band does not by itself mean a lower label, because credit and liquidity go into the score as well.

It asks you to leave the money alone for at least 4 years. That is Koshex's suggestion for this category, not a SEBI rule.

If your goal is closer than that, we suggest a category with a shorter band, such as short duration funds.

The value can dip along the way. The fund's worth follows the prices of its bonds, so it may be lower on the day you need the money.

Getting cash out takes a little time. Under SEBI's rules, same-day instant access belongs to overnight and liquid schemes, so this fund cannot offer it. After you redeem, the money has to reach you within 3 working days.

Koshex is a distributor registered with AMFI under ARN-154632, an intermediary that helps people buy and manage funds. Buying through us means the regular plan: the version of a fund sold via a distributor, who helps you pick and stays with you later.

Our part is to help you pick a fund that fits your goal and timeline. Later, we keep reviewing your holdings. We flag it when a fund changes category, risk level or ranking.

The gain on each SIP instalment dated 1 April 2023 or later is taxed at your slab rate on sale, no matter how long you kept it. A SIP puts a fixed sum into the fund at regular intervals, usually monthly. Your slab rate is the rate you pay on your normal income.

Every instalment is a separate lot. It buys units at the NAV, or price per unit, on its own date. It also starts its own holding period, the time from buying a unit to selling it. For newer units here, that period changes nothing.

Section 76 of the Income-tax Act, 2025 explains why. It treats a fund holding more than 65% in debt and money market instruments as a Specified Mutual Fund. This category qualifies. For its units bought from 1 April 2023, the profit on sale always counts as a short-term capital gain.

Lots from before 1 April 2023 still use the old line. Sold within 24 months of purchase, their gain is taxed at slab rate. Beyond 24 months, it is taxed at 12.5% without indexation, so the cost is not raised for inflation.

An example, using an assumed figure rather than a forecast. Suppose you ran a monthly SIP from August 2023 and redeemed every unit in September 2026, with a total gain of ₹84,000. All the instalments postdate 1 April 2023, so the entire ₹84,000 joins your income. Add 4% cess on the tax. Assume no surcharge, the extra charge on tax once total income passes ₹50 lakh.

• At a 20% top slab: ₹16,800 tax and ₹672 cess, ₹17,472 in all.
• At a 30% top slab: ₹25,200 tax and ₹1,008 cess, ₹26,208 in all.

A resident's redemption carries no TDS (tax deducted at source, before the money reaches you). A lumpsum, one bigger sum invested at once, is simply a single lot under the same rules.

IDCW means payouts made from the fund's income or gains; each one lowers the NAV by the sum paid. Your slab rate applies to it. If a fund house pays you more than ₹10,000 of IDCW in a tax year, 10% TDS comes off the whole payout. You can count that TDS towards the year's tax, and anything above your final tax is refunded.

The return columns show past 3-year and 5-year CAGR. Read them beside the riskometer, expense ratio and AUM. There are 13 listed medium to long duration funds, with ₹9,949 Cr invested across them. Whichever ranking you pick, the table shows its top 10.

A 3-year record exists for 12 of them. Only those are ranked on 3-year return and counted in the averages.

• CAGR is average yearly growth, as if the fund grew at one steady pace. Taken over funds with a 3-year record, the 3-year average is 4.7% and the 5-year average 5.4%. Both are past figures.
• Riskometer. Most funds here share a level. Where one reads Moderately High instead, the extra comes from credit or liquidity.
• Expense ratio is the fund's yearly fee, shown as a percentage of your money and taken out of the fund's value. Lower fees keep more of the return in your hands.
• AUM (assets under management) is what a fund's holdings are worth today, not the sum investors put in.

Two things are missing from the table. One is each fund's Macaulay duration, which its factsheet usually shows. The other is the exit load, a charge some funds levy if you sell within a set time. SEBI fixes none here. Each fund sets its own, if any, in its scheme document; many charge none.