Bank certificates of deposit (CDs) have emerged as the largest holding in debt mutual fund portfolios, overtaking government securities (G-secs), data from Sebi’s annual reports show.

The share of CDs rose to 25 per cent in March 2026 from 15.9 per cent in March 2024, while the share of G-secs fell to 14 per cent from 21.7 per cent during the same period. Corporate debt also saw its share rise to 17 per cent from 15.2 per cent.

The shift comes after changes in debt fund taxation, which have reduced investor interest in longer-horizon schemes that typically invest in government securities. Short-horizon schemes have remained relatively unaffected.

The trend is also reflected in flows. Money market funds attracted ₹59,478 crore in 2025-26, the highest among debt categories, while gilt funds saw outflows of ₹7,799 crore.