Fund ratings (1-5 stars or rankings) by agencies like CRISIL, Morningstar India, and Value Research evaluate a fund's risk-adjusted past performance to help investors make comparisons.
Fund rating agencies use quantitative models to score and rank mutual funds within their SEBI category. The most common systems: Value Research 5-star rating (based on risk-adjusted return, currently the most used), Morningstar Star Rating (risk-adjusted trailing returns), and CRISIL Fund Ranking (performance, portfolio quality, risk management). Ratings are backward-looking — they measure past performance adjusted for risk, not predict future performance. They change quarterly or annually based on updated data.
A 5-star fund on Value Research or Morningstar means it has delivered the best risk-adjusted returns among its peers historically. But past performance doesn't guarantee future results — a 5-star fund today can become a 3-star fund after a change in fund manager or strategy. Use ratings as one input, not the only one. A consistent 4–5 star fund over 5+ years is a more reliable signal than a single-quarter 5-star rating.
Value Research: rates within each SEBI category; top 10% = 5 stars, next 22.5% = 4 stars, etc.
Based on risk-adjusted trailing returns and downside risk measures.
Updated monthly/quarterly — can change significantly after market cycles.
CRISIL also evaluates portfolio quality, manager experience, and investment process.