Debt fund investors have turned wiser now. The two years leading up to the start of Covid-19 pandemic in 2020 was tough for debt fund investors. What started off as a series of credit quality issues that triggered a wave of defaults in 2018 and later, culminated in Franklin Templeton mutual fund winding up six of its debt funds.

Between April 2020 and April 2021, corporate bond funds and low duration funds garnered the maximum inflows. Investors preferred funds that invested mainly in the highest rated debt papers. Investors also moved away their assets from longer duration funds and parked in funds with accrual strategy expecting the interest rates could likely to move higher going ahead.