Published Jun 6, 2026 4 Min Read

Introduction

A mutual fund star rating helps you compare funds based on their historical performance and risk. Ratings can make fund selection easier, but they should not be the only factor behind your investment decision. Looking at the fund's objectives, risk level, and consistency is equally important.

  • Morningstar ratings generally use a 1-star to 5-star scale based on risk-adjusted returns.
  • CRISIL ratings evaluate mutual funds against peers within the same category.
  • A 5-star rating indicates stronger historical performance relative to similar funds.
  • Star ratings are based on past data and can change as fund performance changes.
  • SEBI requires all schemes to display a riskometer ranging from Low to Very High risk.
  • You can invest through SIP or lumpsum modes, with SIPs starting from Rs. 100 per month on the Bajaj Broking website.

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What is a mutual fund star rating?

A mutual fund star rating is a simple scoring system used to compare mutual funds within the same category. It helps you understand how a fund has performed relative to its peers after considering the level of risk taken.

Ratings are usually assigned by independent research agencies. They are designed to make fund comparisons easier, especially when several schemes have similar investment objectives.

Star ratings are not guarantees of future returns. Mutual fund returns remain market-linked and can rise or fall depending on market conditions.

Who determines the star ratings?

Independent research organisations assign star ratings to mutual funds. Two commonly known names in India are Morningstar and CRISIL.

Rating AgencyWhat it evaluatesPurpose
MorningstarRisk-adjusted historical performanceCompare funds within a category
CRISILPerformance relative to peers and risk factorsHelp investors assess fund quality

A Morningstar rating mutual fund score typically ranges from 1 star to 5 stars. Similarly, a CRISIL rating mutual fund assessment ranks funds against comparable schemes.

These ratings are independent of the fund house and separate from SEBI's regulatory framework. SEBI regulates mutual funds, while rating agencies provide analytical assessments.

What factors influence mutual fund star ratings?

Several factors can affect a mutual fund star rating.

Historical performance

Agencies review how a fund has performed over different time periods. Consistent performance is generally viewed more favourably than short-term outperformance.

Risk-adjusted returns

Ratings do not focus only on returns. They also consider how much risk the fund took to generate those returns.

Peer comparison

Funds are compared with similar schemes. For example, a large-cap equity fund is compared with other large-cap funds rather than debt funds.

Consistency

A fund that performs steadily across different market conditions may receive a stronger rating than a fund with highly volatile results.

Remember that star ratings are based on historical information. Future performance may differ significantly from past results.

Breaking down the star rating scale

Most rating systems use a scale ranging from 1 star to 5 stars.

Star RatingGeneral Meaning
5 StarsAmong the strongest performers in its category based on historical risk-adjusted returns
4 StarsAbove-average performance relative to peers
3 StarsAverage performance within the category
2 StarsBelow-average performance relative to peers
1 StarAmong the weaker performers in the category

A common question is what does mutual fund star rating mean and should you follow it? The rating can be a useful starting point, but it should not replace detailed research.

You should also review the fund's investment objective, portfolio composition, expense ratio, fund manager experience, and risk level shown through the SEBI riskometer.

What are the benefits and drawbacks of star ratings?

Star ratings offer useful insights, but they also have limitations.

BenefitsDrawbacks
Easy comparison between similar fundsBased on past performance
Simple scoring systemRatings can change over time
Helps shortlist schemes quicklyDoes not guarantee future returns
Considers risk-adjusted performanceMay not reflect future market conditions

When comparing Morningstar vs CRISIL rating mutual fund India assessments, remember that each agency uses its own methodology. A fund may receive different ratings from different organisations.

You should use ratings as one input among several factors when choosing a mutual fund.

Conclusion

A mutual fund star rating helps you compare mutual funds based on historical risk-adjusted performance. Ratings from agencies such as Morningstar and CRISIL can simplify fund selection, but they should not be treated as predictions of future returns.

Before investing, review the fund's objective, risk profile, portfolio strategy, expense ratio, and consistency. Also check the SEBI-mandated riskometer, which classifies schemes as Low, Low to Moderate, Moderate, Moderately High, High, or Very High risk.

The Bajaj Broking website offers access to 4,000+ mutual fund schemes across equity, debt, hybrid, ELSS, thematic, and other categories, with SIP investments starting from Rs. 100 per month.

Frequently asked questions

How reliable are star ratings for mutual funds?

Mutual fund star ratings are useful for comparing funds within the same category because they evaluate historical risk-adjusted performance. However, they are not guarantees of future returns. When reviewing a mutual fund star rating, you should also consider the fund's objective, expense ratio, portfolio quality, and the SEBI-mandated riskometer. The Bajaj Broking website provides access to multiple fund categories for comparison.

Is a 3 star rating from Morningstar good?

A 3-star Morningstar rating generally indicates average performance relative to comparable funds in the same category. It means the fund has performed close to its peer group after adjusting for risk. A 3-star fund is not necessarily poor; it may still suit your financial goals, risk tolerance, and investment horizon depending on your requirements.

Can mutual fund star ratings change over time?

Yes. Mutual fund star ratings can change as new performance data becomes available and peer rankings shift. A fund rated 5 stars today may receive a lower rating later if its performance weakens relative to competitors. Because ratings are dynamic, you should review them periodically alongside fund fundamentals and the SEBI riskometer before making investment decisions.

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Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.

Disclaimer

Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319

BFL does NOT:

(i) provide investment advisory services in any manner or form.

(ii) carry customized/personalized suitability assessment.

(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.

In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.

Disclaimer on Risk-O-Meter:

Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.


Disclosure
: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finserv Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.