Choosing the right mutual fund from a universe of over 1,900 schemes is no easy task. While short-term returns often dominate investors’ attention, sustained performance across market cycles is a better indicator of a fund’s quality. The bl.portfolio Star Track Mutual Fund Ratings seek to simplify this exercise by identifying funds that have consistently delivered superior risk-adjusted returns within their respective categories.

Launched in October 2018, the bl.portfolio Star Track Mutual Fund Ratings are updated twice a year using data as of June-end and December-end. The latest edition, based on data as of June 30, 2026, evaluates 488 schemes across 32 actively managed mutual fund categories. The ratings shortlist these schemes from a universe of 1,945 mutual fund schemes spanning 39 categories and asset classes, providing investors with a structured framework to compare funds and build long-term portfolios.

The rating framework is based on two key measures: Rolling returns and the Sortino ratio. Together, they help identify funds that have delivered consistent returns while keeping downside risk under control. While rolling returns measure a fund’s performance across different market periods, the Sortino ratio evaluates how efficiently those returns have been generated by considering only downside volatility.

For equity and hybrid funds, the ratings are based on one-, three- and five-year rolling returns using seven years of NAV history. Debt funds are assessed using one-, two- and three-year rolling returns over the past five years. In addition, one-year trailing returns are included to reflect recent performance. The final score gives a 60 per cent weight to rolling returns, 30 per cent to the Sortino ratio and 10 per cent to trailing returns. Based on these scores, funds are assigned star ratings from one to five (lowest to highest), making it easier for investors to identify relatively better-performing schemes within each category.

Funds are assigned star ratings based on percentile rankings: top 10 percentile (five-star), next 20 percentile (four-star), middle 40 percentile (three-star), next 20 percentile (two-star), and bottom 10 percentile (one-star).

Summary of the update

The latest edition, based on data as of June 30, rates 488 actively-managed mutual fund schemes across 32 equity, hybrid and debt fund categories. A new addition this time is the multi-asset allocation fund category, which has become eligible for evaluation as at least five schemes now have a comparable seven-year track record. For this category, only funds that maintained an allocation of more than 65 per cent to equity and equity-related instruments over the past seven years have been considered, ensuring a like-for-like comparison.

Upgrades

Fund quality remained largely stable in the latest review, with 45 schemes retaining their five-star ratings between December 2025 and June 2026, reflecting sustained performance across market cycles.

Among equity funds, schemes such as Nippon India Large Cap, ICICI Prudential Large Cap, Quant Mid Cap, Edelweiss Mid Cap, Quant Small Cap, Parag Parikh Flexi Cap, HDFC Flexi Cap and JM Flexicap Fund continued to hold the highest rating. In the hybrid segment, funds such as Quant Aggressive Hybrid, Bank of India Mid & Small Cap Equity & Debt, ICICI Prudential Equity & Debt, HDFC Balanced Advantage and Baroda BNP Paribas Balanced Advantage Fund retained their five-star status. In debt funds, schemes such as UTI Banking & PSU, ICICI Prudential Banking & PSU Debt, ICICI Prudential Corporate Bond, Nippon India Corporate Bond, UTI Dynamic Bond, ICICI Prudential Gilt and SBI Gilt Fund remained among the top-rated schemes.

The latest review also saw several funds move into the top tier. Nine schemes were upgraded from four stars to five, while five funds jumped directly from three stars to five. Notable upgrades from four to five stars include Quant Large & Mid Cap, Nippon India Growth Mid Cap, Bank of India Small Cap, SBI Conservative Hybrid and Aditya Birla Sun Life Dynamic Bond Fund. Funds making a two-notch leap from three to five stars include Invesco India Largecap, Tata India Consumer, Motilal Oswal ELSS Tax Saver, SBI Healthcare Opportunities and HSBC Equity Savings Fund.

A further 21 schemes improved from three to four stars. These include HSBC Flexi Cap, Aditya Birla Sun Life Flexi Cap, Invesco India Large & Mid Cap, Baroda BNP Paribas Large Cap, Union Small Cap, Bandhan Aggressive Hybrid, Bandhan Banking & PSU Debt, Aditya Birla Sun Life Banking & PSU Debt, SBI Floating Rate Debt, Bandhan Gilt and Baroda BNP Paribas Gilt Fund.

Downgrades

Not all funds managed to sustain their earlier ratings. Thirteen schemes slipped from five stars to four, including HDFC Large & Mid Cap, Canara Robeco Large Cap, HDFC Mid Cap, Nippon India Small Cap, ICICI Prudential Pharma Healthcare & Diagnostics, SBI Technology Opportunities, Kotak Debt Hybrid, Sundaram Equity Savings, 360 ONE Dynamic Bond and Nippon India Ultra Short Duration Fund.

Another 25 schemes fell from four stars to three. These include Union Flexi Cap, PGIM India Flexi Cap, SBI Large & Midcap, HDFC Large Cap, Kotak Large Cap, Axis Small Cap, Baroda BNP Paribas Aggressive Hybrid, HDFC Equity Savings, Axis Banking & PSU Debt, Franklin India Banking & PSU Debt, ICICI Prudential Floating Interest and DSP Gilt Fund.

Prudent play

The ratings are intended to help investors identify funds that have consistently delivered superior risk-adjusted returns over the long term. While the ratings can serve as a useful starting point for fund selection, investors should choose schemes that align with their asset allocation, risk appetite and investment horizon. Preference can be given to four- and five-star funds. A brief spell of underperformance should not be a reason to exit if a fund continues to enjoy a strong rating. However, funds that consistently slip to two stars or below deserve a closer review and may be considered for replacement.

Published on July 18, 2026