Ultra Short Duration Funds

Holds instruments maturing in 3–6 months. Slightly better yields than liquid funds with very low sensitivity to interest rate changes.

Suited role in a portfolio

Slightly better yields than liquid funds for 1–6 month parking

Suitable holding period

1 to 6 months

Interest rate sensitivity

Very low — Macaulay duration of 3–6 months

Inflation-beating context

May marginally beat inflation before tax; unlikely to beat inflation after tax at higher brackets

Taxation

Debt taxation: gains taxed at income slab rate