Yes, debt funds can give negative returns. This happens to short term debt funds in a falling interest rate scenario. For example: If you had invested Rs 1 Lakh in Bank FD on 1st April 2020, its value after a year would be Rs 1,05,807. Whereas the maturity value of HDFC Short Term Debt Fund during the same period is Rs 99,648. So, you would have made a negative return of 0.35%.