Given their focus on instruments with a short duration, they offer low interest-rate sensitivity. They typically invest in treasury bills (T-bills), call money, commercial papers (CP) and certificate of deposits (CD), among others.

Senior fund analyst Himanshu Srivastava revisited the ratings assigned to four funds.

If you would like to read a more detailed analysis, click on the name of the fund.

ICICI Pru Flexible Income Plan (Regular/Growth) 

Analyst Rating: Bronze

Expense Ratio: 0.44%

Despite changes at the helm, there is a consistency in the process. The managers continue to play it safe, investing primarily in AAA or equivalent-rated securities, with higher emphasis on safety and liquidity over the potential for outsized returns. As a result, the fund's portfolio typically has lower credit sensitivity than a typical peer.

The investment approach is research-based and combines qualitative aspects with quantitative analysis. The manager focuses on the macroeconomic scenario, liquidity conditions, spreads and other short-term influencing factors to define the asset allocation and maturity profile. Investors should be aware that the fund will underperform when credit is the order of the day. The strategy is a plus though if situations such as 2008's flight to quality arise again.

Franklin India Savings Plus (Growth)

Analyst Rating: Bronze

Expense Ratio: 0.85%

In March 2014, the fund was rebranded as Franklin India Savings Plus Fund from Templeton Floating Rate Income Fund.

In April 2014, Umesh Sharma took over the wheel from manager Pallab Roy as part of the realignment of the team internally. The fund's investment strategy also underwent a makeover that year. While taking credit bets (that is, investing in sub-AAA rated securities) was a part of the early strategy, the focus shifted towards securities with high credit quality. Following the change in strategy, the manager predominantly invests in AAA rated securities.

The investment approach is research-intensive in nature, which involves acquiring an in-depth understanding of companies and their operations. The fund manager mainly scouts for securities from the corporate bond segment that are mispriced and available at attractive yields.

The fund's mandate requires the manager to invest at least 65% of assets in securities with maturities not exceeding 182 days. The manager has the flexibility to take duration bets, with the remaining 35% depending on the interest rate scenario, which could provide an additional kicker to the portfolio. This gives the fund an edge over its competition as not many funds in the ultrashort bond category are run with such flexibility.

Overall, the fund's average maturity is maintained in the range of 6-12 months.

Franklin India Ultra Short Bond Fund Super Institutional Growth

Analyst Rating: Gold

Expense Ratio: 0.30%

A bit more daring than its peers, this fund stands out in this category.

The investment team at Franklin Templeton focuses on underpriced money market instruments and bonds, seeking to add value by identifying securities that have improving or strong credit fundamentals. Thus, the fund typically has a slightly more credit-sensitive portfolio than a typical peer.

The investment team has skillfully controlled the credit risk and has avoided pitfalls in the past, noticeably 2008, by avoiding risky real estate debt when it was the norm to invest in such issues.

There is a contrarian approach in the investment process, with bets often taken against the grain so long as the risk/reward is favourable. Although a wrong bet can lead to significant underperformance, we believe the research-intensive approach helps with such a process.

Franklin India Low Duration Fund Monthly Dividend

Analyst Rating: Silver

Expense Ratio: 0.75%

The fund's biggest draw is the presence of a seasoned manager in Santosh Kamath (CIO, Fixed Income) at the helm. He is the key decision-maker on investments in sub-AAA rated bonds or any form of structured debt across funds from the fund house.

The process is well-defined and research-intensive. Kamath's pursuit of underpriced securities and those offering attractive yields often takes him down the credit ladder and the allocation to sub-AAA rated securities tends to be significantly above the norm.

There is also a contrarian approach in the investment process; bets are often taken against the grain so long as the risk/reward is favourable. A wrong bet can lead to significant underperformance, but we believe the research-intensive process helps mitigate the risks inherent in such an approach.

In both the above funds, the team relies on its research strength to mitigate credit risk, which involves rigorous qualitative and quantitative analysis to gauge the creditworthiness of companies. It heeds portfolio construction and conducts regular stress tests to pre-empt other downside risks, particularly that of liquidity in the portfolio.