Duration-based hedging is a strategy that involves adjusting the duration of a portfolio to hedge against interest rate risk. Duration is a measure of the sensitivity of the price of a bond or a bond portfolio to a change in interest rates. In this context, Anil Kumar can use duration-based hedging to create a combined position in interest rate futures contracts that does not change in value with small changes in yield. This is achieved by creating a position that has zero duration. When the position has zero duration, it means that the value of the position does not change due to small changes in yield. This is exactly what Anil Kumar wants to achieve. Therefore, duration-based hedging is the correct strategy for him to use.

Choice A is incorrect. Convexity-hedging is a strategy that aims to protect against large yield changes, not minor fluctuations. It involves managing the curvature of the price-yield relationship of a bond portfolio, which becomes significant when interest rates change dramatically.

Choice C is incorrect. Hedging with FRAs (Forward Rate Agreements) primarily protects against changes in short-term interest rates and does not necessarily remain unaffected by minor yield fluctuations. FRAs are more suitable for hedging specific future interest rate exposures rather than general yield movements.

Choice D is incorrect. DV01 hedging involves adjusting a portfolio to make its dollar value change by one basis point for each basis point change in yield, which means it would be affected by even minor yield fluctuations, contrary to what Anil Kumar wants.