Modified duration in debt mutual funds

Tue, 12 May 2026 00:00:00 +0000

Modified duration is a measure of the price sensitivity of a fixed-income instrument (or a debt mutual fund’s portfolio) to a change in interest rates (yield). It quantifies the approximate percentage change in bond price (or fund NAV) for a 1 percentage point (100 basis points) parallel shift in the yield curve. Modified duration is the primary interest rate risk metric disclosed in Indian debt mutual fund factsheets.

A debt fund with a modified duration of 5 years will see its NAV fall by approximately 5 per cent if yields rise by 1 percentage point, and rise by approximately 5 per cent if yields fall by 1 percentage point. This makes modified duration the single most important number for assessing interest rate risk in a debt fund.

NAV Sensitivity on WebNotes

Modified duration in debt mutual funds