Debt funds lend money. They buy bonds issued by the government, banks and companies, and earn interest on them. Their returns are lower than equity and far steadier, which makes them the stabiliser in a portfolio.
They vary by how long they lend and to whom. Overnight and liquid funds lend for days. Short duration funds for a year or two. Gilt funds lend only to the government. Corporate bond funds lend to companies with strong credit ratings. Longer lending and weaker borrowers both add risk.
Debt funds are not fixed deposits. They can lose value if interest rates jump or a borrower defaults. But for money you need in one to three years, or as the cushion that lets you sit through an equity fall, they do a job that equity cannot.
Debt is the cushion. It lets you keep your equity through a bad year.