What’s in the latest MF ratings update?

The latest edition of the bl.portfolio Star Track Mutual Fund Ratings is now live. The objective of the framework is straightforward: to simplify mutual fund selection by helping investors navigate over 1,800 schemes across 39 categories and asset classes, and to identify funds that have delivered consistent performance and are well suited to long-term investment goals.

The ratings are derived from an in-depth assessment of a fund’s historical performance, incorporating both returns and risk. The methodology rests on two core pillars, rolling returns and the Sortino ratio, to evaluate consistency across market cycles and exposure to downside risk. Rolling returns capture the stability of performance over time, while the Sortino ratio measures risk-adjusted returns by focusing exclusively on negative volatility.

For equity and hybrid funds, one-, three-, and five-year rolling returns are analysed using seven years of NAV data. Debt schemes are assessed using one-, two-, and three-year rolling returns based on five years of NAV history. To reflect recent trends, one-year trailing returns are also included. The final composite score assigns a 60 per cent weight to historical returns, 30 per cent to the Sortino ratio, and 10 per cent to trailing returns. Based on these scores, funds are ranked on a five-star scale, with five stars indicating the strongest performers and one star the weakest, enabling investors to quickly identify consistently high-quality funds.

Funds with an average corpus of less than ₹100 crore are excluded from the rating process. Equity and hybrid schemes with less than seven years of track record, and debt funds with less than five years of history, are also not considered. Categories with fewer than five eligible schemes, as well as funds that have undergone a significant change in mandate or portfolio strategy, are excluded.

Certain categories are excluded due to a lack of comparability. For instance, multi-asset funds were not rated, as schemes within the category follow distinct investment approaches, making meaningful comparison difficult. Multi-cap funds, being a relatively new category, were also excluded since most schemes do not yet have a sufficient track record under the revised allocation norms, barring the Invesco India Multi Cap Fund. Additionally, debt funds that reported partial recoveries from distressed assets, resulting in NAV spikes of more than 7 per cent post-recovery, were excluded to avoid distortions in performance assessment.

Retirement funds and children’s funds are not rated, as investment styles within these categories are not uniform. Passive funds are excluded, as return-based metrics are not suitable for evaluating their performance. Liquid and arbitrage funds, which are primarily used as short-term parking options for surplus cash, are also not rated.

Launched in October 2018, the bl.portfolio Star Track Mutual Fund Ratings follow a disciplined biannual review cycle, with updates released in January and July based on data as of December-end and June-end, respectively. In the latest update, using data as of December 31, 2025, the framework evaluated 475 schemes across 31 actively managed mutual fund categories.

Among these, 41 schemes retained their five-star ratings from June to December 2025, underscoring sustained strength across performance metrics. In equities, consistent performers included Parag Parikh Flexi Cap, ICICI Prudential Large & Mid Cap, HDFC Flexi Cap, ICICI Prudential Large Cap, Nippon India Large Cap, Canara Robeco Large Cap, and Nippon India Small Cap. In hybrids, ICICI Prudential Equity & Debt, Bank of India Mid & Small Cap Equity & Debt, HDFC Balanced Advantage, and Baroda BNP Paribas Balanced Advantage held on to their top ratings. The debt segment also saw steady names such as 360 ONE Dynamic Bond, ICICI Prudential Savings, Nippon India Money Market, ICICI Prudential Banking & PSU Debt, Nippon India Corporate Bond, ICICI Prudential Gilt, and S...