Best Gilt Mutual Funds to Invest in September 2026

Best Gilt Mutual Funds to Invest in September 2026

Gilt mutual funds are debt schemes that invest primarily in government securities, or G-Secs. Under Securities and Exchange Board of India (SEBI) categorisation, gilt funds are required to invest at least 80% of their assets in government securities.

Because these schemes invest in government-backed securities, they generally have very low credit or default risk. However, they can be highly sensitive to changes in interest rates. When interest rates rise, government bond prices generally fall, which can negatively affect the NAV of gilt funds.

For September 2026, ETMutualFunds has shortlisted five gilt mutual funds based on a combination of quantitative parameters.

5 Gilt Mutual Funds Shortlisted for September 2026

Gilt Mutual FundSeptember 2026 StatusNippon India Gilt FundShortlistedBandhan Gilt FundShortlistedSBI Gilt FundShortlistedICICI Prudential Gilt FundShortlistedAditya Birla Sun Life G-Sec FundShortlisted

These are the five schemes included in ETMutualFunds' September 2026 recommendation list.

1. Nippon India Gilt Fund

Nippon India Gilt Fund is one of the schemes included in the September 2026 shortlist. ETMutualFunds reported that the scheme had remained in the third quartile for 25 months, after previously being in the fourth quartile.

The fund's portfolio is focused on government securities, making interest-rate movements an important factor for investors to monitor.

2. Bandhan Gilt Fund

Bandhan Gilt Fund is another scheme included in the September list. According to ETMutualFunds, the scheme had been in the second quartile for the previous 11 months, after being in the third quartile earlier.

The fund's performance can be affected by changes in bond yields and expectations surrounding monetary policy.

3. SBI Gilt Fund

SBI Gilt Fund also features in the September 2026 shortlist. The scheme invests primarily in government securities and therefore has exposure to changes in interest rates and government bond yields.

Current market data showed the fund among the larger gilt schemes, with its direct-growth option having an AUM of around ₹8,215 crore as of September 22, 2026.

4. ICICI Prudential Gilt Fund

ICICI Prudential Gilt Fund is included among the five schemes shortlisted for September.

As of September 22, 2026, the direct-growth option had an AUM of around ₹7,950 crore, with a reported three-year return of about 7.08% on the data source used. These figures are historical and can change with market conditions.

5. Aditya Birla Sun Life G-Sec Fund

Aditya Birla Sun Life G-Sec Fund completes the September 2026 shortlist.

ETMutualFunds noted that the scheme had remained in the third quartile for 29 months, after previously being in the fourth quartile.

Why Are Gilt Funds Sensitive to Interest Rates?

Gilt funds have limited credit risk because they invest in government securities, but that does not mean they are risk-free investments.

Bond prices and yields generally move in opposite directions. Therefore, if interest rates rise, existing bonds can lose market value, potentially reducing the NAV of a gilt fund. Conversely, falling interest rates can support bond prices and gilt-fund returns.

ETMutualFunds notes that gilt funds may benefit when interest rates decline or when markets anticipate a fall in rates. However, investors need to be prepared for volatility and should generally have a sufficiently long investment horizon.

How Were These Gilt Funds Selected?

ETMutualFunds used several quantitative parameters to shortlist the schemes:

• Mean rolling returns: Daily rolling returns calculated over the previous three years.

• Consistency: Measured using the Hurst Exponent over three years.

• Downside risk: Based on the negative returns generated by a scheme.

• Outperformance: Fund returns compared with the relevant benchmark using rolling returns.

• Asset size: A minimum asset-size threshold of ₹50 crore was applied for debt funds.

The methodology is designed to assess historical performance, consistency, downside behaviour and relative performance rather than simply looking at recent one-year returns.

Are Gilt Funds Suitable for Every Investor?

Gilt funds may not be suitable for investors looking for stable, short-term debt returns. Their NAVs can fluctuate considerably when interest-rate expectations change.

ETMutualFunds describes gilt funds as more appropriate for aggressive or sophisticated debt investors who understand interest-rate cycles and can tolerate volatility.

Investors with short-term goals may therefore need to consider whether the interest-rate sensitivity of gilt funds matches their time horizon and risk tolerance.

Key Takeaways

• ETMutualFunds shortlisted five gilt mutual funds for September 2026.

• The list includes Nippon India Gilt Fund, Bandhan Gilt Fund, SBI Gilt Fund, ICICI Prudential Gilt Fund and Aditya Birla Sun Life G-Sec Fund.

• Gilt funds invest primarily in government securities and generally have low credit risk.

• They remain highly sensitive to interest-rate movements.

• Falling rates can support bond prices, while rising rates can put pressure on gilt-fund NAVs.

• The September shortlist is based on historical quantitative measures and does not guarantee future returns.