Recession is making fixed-income investors cautious. As the economy is expected to slow down, many are avoiding relatively lower-rated bonds from fear of default. Corporate-bond funds, mutual fund schemes that invest at least 80 percent of the money in AAA and AA rated bonds have emerged as favourites. Relatively high yield to maturity of portfolios of corporate bond funds make them even more attractive. As on March 31, average yield-to-maturity of 7.44 percent was reported.

Corporate bond funds got net inflows of Rs 15,626 crore in March, as per data by AMFI. As many as 21 corporate bond funds put together manage assets worth Rs 1.3 trillion as of March end.