Investment Desk · Methodology v1.1 · last updated 2026-05-14

How we rate mutual funds.

Five segments — equity, debt, hybrid, ELSS, index/ETF — each with its own scoring formula. Trailing returns alone don't survive forward selection bias: we blend Sharpe, Sortino, rolling-return percentiles, and SEBI-categorisation discipline into a single per-category score.

· AMFI + ValueResearch + Morningstar grounded· SEBI 2018 categorisation respected· Direct-plan TER preferred
What this is — and what it isn't

Comparison data, not personalised advice.

What this scoring does
  • Ranks funds against their SEBI-defined category peers on published, verifiable inputs (NAV history, expense ratio, AUM, manager tenure).
  • Surfaces past performance and structural quality — useful to narrow a 1,000-fund universe down to a shortlist.
  • Shows our work — every weight is published here so you can judge whether our framework matches how you think about funds.
What it doesn't do
  • Tell you which fund to buy. That depends on your goal, horizon, risk appetite, tax slab, and existing portfolio — none of which this scoring engine knows.
  • Predict future returns. Risk-adjusted past performance is factual; future returns are not.
  • Constitute investment advice under SEBI Regulations. For personalised guidance, consult a SEBI-registered Investment Adviser at sebi.gov.in.

We're explicit about this because we think readers deserve to know exactly what comparison data is — a starting point for your own research, anchored to the same SEBI category definitions a registered adviser would use. The math is in your hands.

Per-segment rubrics

Five formulas. One scoring scale.

Equity funds (large/mid/small/multi/flexi)

Formula — Risk-adjusted return 35% · Trailing returns 20% · Expense ratio 15% · Manager + AMC 15% · AUM + portfolio quality 15%

Risk-adjusted return is the single largest weight because trailing-return-only methodologies survive recency bias poorly. We blend Sharpe + Sortino + rolling-return percentile to triangulate manager skill from luck.

Factor
Weight
Risk-adjusted return (5y Sharpe + 5y Sortino)
35%
Trailing returns + rolling-return percentile
20%
Expense ratio (direct plan)
15%
Fund manager + AMC
15%
AUM + portfolio quality
15%
Total
100%
Risk-adjusted return (5y Sharpe + 5y Sortino): Sharpe = excess return / std dev. Sortino weights only downside vol — more meaningful for retail. Both versus category benchmark (CRISIL Hybrid 35+65 / Nifty 500 / etc.)
Trailing returns + rolling-return percentile: 1y/3y/5y CAGR (each scored vs category). Rolling 3y returns over 5y window — fund consistently top-quartile beats fund that won one year and lost another.
Expense ratio (direct plan): Direct-plan TER. India regulator caps at 2.25% for equity above ₹500cr AUM, lower for smaller. Index funds < 0.5%, active large-cap < 1.5% acceptable.
Fund manager + AMC: Manager tenure at this fund (3y minimum for skill-attribution). Manager track record at prior funds. AMC's overall record + RBI/SEBI penalties.
AUM + portfolio quality: Right-sized AUM (small-cap funds with > ₹10K cr struggle; large-cap funds with < ₹500cr struggle). Concentration vs benchmark, sector tilts, cash-call discipline.

Debt funds

Formula — Risk-adjusted return 30% · Yield-to-maturity 20% · Credit quality 20% · Duration management 15% · Expense ratio 15%

Different physics: yield + duration risk + credit risk are the big three. SEBI's debt-fund categorisation (gilt/short-term/medium/long/dynamic/floater/credit-risk/corporate-bond/banking-PSU/liquid/overnight) defines what risks each fund takes — we score within category, not across.

Factor
Weight
Risk-adjusted return
30%
Yield-to-maturity (YTM)
20%
Credit quality
20%
Duration management
15%
Expense ratio
15%
Total
100%
Risk-adjusted return: Especially important in debt — many funds blew up in 2018-2020 chasing yield (DHFL, IL&FS, Franklin). Sharpe + max-drawdown over 3y.
Yield-to-maturity (YTM): Indicative future return assuming bonds held to maturity. Should be appropriate for category — too-high YTM in 'safe' category = hidden credit risk.
Credit quality: % in AAA / AA / A / below-A / unrated. Concentration in single issuer, exposure to NBFCs vs PSUs vs corporates.
Duration management: Modified duration vs category mandate. Macaulay duration trend over time — skilled managers shorten ahead of rate hikes, lengthen ahead of cuts.
Expense ratio: Debt funds should be cheaper than equity. Direct-plan TER < 0.5% for liquid, < 1% for short-term, < 1.25% for credit-risk.

Hybrid funds

Formula — Risk-adjusted return 30% · Asset allocation discipline 20% · Trailing returns 20% · Expense + manager 15% · Tax efficiency 15%

Equity + debt mix. SEBI categorisation: aggressive (65-80% equity), conservative (10-25% equity), balanced advantage / dynamic-asset-allocation, equity savings, multi-asset. Each has its own benchmark + risk profile.

Factor
Weight
Risk-adjusted return
30%
Asset allocation discipline
20%
Trailing returns vs hybrid benchmark
20%
Expense + manager
15%
Tax efficiency
15%
Total
100%
Risk-adjusted return: Sharpe + downside capture. Hybrid funds advertise 'lower volatility' — we verify via realised drawdowns.
Asset allocation discipline: Does the fund stay within its SEBI-mandated band? Style drift is common in 'dynamic' funds. Score deviations.
Trailing returns vs hybrid benchmark: CRISIL Hybrid 35+65 / 50+50 / 75+25 — match the fund's intent. Outperformance net of expense.
Expense + manager: Direct-plan TER + manager tenure. Hybrid managers need both equity + debt expertise — penalised if AMC has weak debt team.
Tax efficiency: Equity-oriented hybrid (>65% equity) gets equity tax treatment (10% LTCG above ₹1.25 L). Debt-oriented gets slab-rate. Categorisation by AMFI matters for post-tax score.

ELSS (tax-saving)

Formula — Risk-adjusted return 30% · Trailing returns 20% · Tax-savings benefit 20% · Expense 15% · Manager + AUM 15%

Equity funds with 3y lock-in + 80C deduction up to ₹1.5 L (old regime only — new regime invalidates). Score includes tax saving as a quantifiable benefit, but only for old-regime taxpayers.

Factor
Weight
Risk-adjusted return
30%
Trailing returns
20%
Tax-savings benefit (old regime)
20%
Expense ratio (direct plan)
15%
Manager + AUM
15%
Total
100%
Risk-adjusted return: Same as equity multi-cap. Sharpe + Sortino over 5y.
Trailing returns: ELSS funds compete against Nifty 500 / multi-cap benchmark. Outperformance net of expense ratio.
Tax-savings benefit (old regime): 80C deduction worth ₹1.5 L × marginal tax rate. For 30%-bracket taxpayer, that's ₹46,800/year saved. Effective return boost = saving / total invested.
Expense ratio (direct plan): ELSS direct-plan TER 0.5-1.5% acceptable. Index ELSS funds (rare) cheaper still.
Manager + AUM: Manager tenure 5y+ ideal. AUM right-sized for the strategy.

Index funds + ETFs

Formula — Tracking error 35% · Expense ratio 30% · Liquidity (ETFs) 15% · AMC + index choice 20%

Passive products — manager skill is irrelevant; tracking efficiency is everything. Score weights tracking error, expense ratio, liquidity (for ETFs). Active manager-related factors don't apply.

Factor
Weight
Tracking error
35%
Expense ratio
30%
Liquidity (ETFs only)
15%
Index choice + AMC
20%
Total
100%
Tracking error: How tightly does NAV match the index? Best Indian Nifty 50 index funds run 0.05-0.15% TE. Above 0.5% indicates poor execution / tracking issues.
Expense ratio: The cheaper, the better. Top Nifty 50 funds: 0.03-0.10% TER. Anything > 0.30% for Nifty 50 is uncompetitive given the alternatives.
Liquidity (ETFs only): Bid-ask spread + average daily volume. Indian ETFs vary wildly — some have spreads > 1% which destroys index-tracking advantage.
Index choice + AMC: Underlying index (Nifty 50 vs Nifty 500 vs S&P BSE 100, etc.). Some indices are better diversified. AMC rebalancing methodology + securities-lending policy.
Standardised adjustments

Cross-segment modifiers.

  • ·Fund manager change in last 12 months (re-evaluate manager-tenure component) − 0.0 to −0.4 stars
  • ·AMC sponsor change / merger event −0.0 to −0.3 stars (until new track record established)
  • ·SEBI penalty event on the AMC −0.2 to −0.7 stars
  • ·Fund's AUM doubled in last 12 months without category-warranted growth (capacity risk) −0.1 to −0.3 stars
  • ·Direct-plan TER reduced (good for investor) +0.0 to +0.2 stars
  • ·Active style drift outside category mandate −0.2 to −0.5 stars
Data sources

Where the values come from.

AMFI daily NAV feed

All schemes' daily NAVs, primary source for return calculations.

Scheme Information Document (SID) + monthly factsheets

Portfolio holdings, sector exposure, top-10 holdings, expense ratio, fund manager.

ValueResearch + Morningstar benchmarks

Cross-referenced for category benchmarks + rolling-return percentile context.

CRISIL ratings

Independent credit ratings on debt-fund holdings.

SEBI scheme categorisation circular

2018 scheme-cat rules define fund mandate boundaries.

Update cadence

When scores get refreshed.

  • Daily: AMFI NAV ingest, return calcs.
  • Monthly: Portfolio + sector + top-10 review when factsheets publish (typically 7th of next month).
  • Quarterly: Manager tenure + AMC capital + AUM growth audit.
  • Event-triggered: Manager change, SEBI penalty, AMC merger, scheme merger → re-score within 7 days.
Related methodologies

Other product types we rate.

Mutual Funds methodology v1.1 · last updated 2026-05-14
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