Long term debt funds invest in bonds with very long expiry periods. This period can be as long as 10 years. Most of the long term debt fund investment goes into government bonds.
Holdings of one of the famous long term debt fund : ICICI pru long term fund : http://www.moneycontrol.com/mutual-funds/icici-prudential-long-term-plan-direct-plan/portfolio-holdings/MPI2285
Long term debt fund can go up and down depending upon the yields of these bonds.
The net asset value of any long term debt fund will fall when yield of these 10 year government bond rise. These bonds are traded in bond market and can rise and fall due to variety of reasons:
1) Market sentiments: If inflation is rising or macro data are not coming out good. These bonds will grow attract higher yield and as a result your long term debt fund NAV will fall.
2) RBI policy: Any hike in monetary ratios(repo rate etc) will again increase the yield of 10 year bond yield and decrease ong term debt fund NAV.
To check the present and past yield of 10 year bond refer : https://www.bloomberg.com/quote/GIND10YR:IND
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