Does a higher MF rating means higher returns?

Does a higher MF rating means higher returns?

Shashikant Singh

 
Many investors select and invest in a fund based on the ratings given by various rating agencies. They perceive that a higher rating means better returns going ahead. These ratings are actually based on the past performance of the funds that have completed a certain year of their existence, which is more than one year. Hence, you will find that one-year returns do not conform to the ratings. Therefore, you will find that funds with lower ratings might be performing better than the funds with higher ratings in the last one year.  
 
Following table shows the ratings of the fund from different agencies and the last one-year performance of the fund along with ratings. 

Scheme Name 

Crisil Rating 

MorningStar Rating 

Value Research Rating 

AUM (Rs Cr) 

Wt. Rating* 

Point to Point 1 Yr Returns (%) 

Rank point to point Returns 

Canara Robeco Bluechip Equity Fund - Direct Plan 

3,691.25 

54.05 

11 

IDBI India Top 100 Equity Fund - Direct Plan 

486.26 

58.99 

Kotak Bluechip Fund - Direct Plan 

2,945.01 

55.8 

UTI Mastershare Fund - Direct Plan 

8,580.43 

57.86 

Axis Bluechip Fund - Direct Plan 

29,160.60 

52.6 

17 

Mirae Asset Large Cap Fund - Direct Plan 

27,434.76 

52.25 

20 

Invesco India Largecap Fund - Direct Plan 

369.05 

52.33 

19 

Edelweiss Large Cap Fund - Direct Plan 

262.98 

53.08 

16 

Franklin India Bluechip Fund - Direct Plan 

6,463.73 

65.81 

SBI Bluechip Fund - Direct Plan 

29,243.94 

56.4 

Navi Large Cap Equity Fund - Direct Plan 

100.51 

54.87 

Tata Large Cap Fund - Direct Plan 

983.31 

59.31 

Aditya Birla Sun Life Frontline Equity Fund - Direct Plan 

21,020.31 

57 

Union Largecap Fund - Direct Plan 

195.44 

53.85 

12 

BNP Paribas Large Cap Fund - Direct Plan 

1,128.86 

49.66 

24 

IDFC Large Cap Fund - Direct Plan 

822.96 

47.62 

25 

PGIM India Large Cap Fund - Direct Plan 

332.16 

52.04 

21 

LIC MF Large Cap Fund - Direct Plan 

568.07 

53.72 

13 

Baroda Large Cap Fund - Direct Plan 

45.33 

53.55 

15 

ICICI Prudential Bluechip Fund - Direct Plan 

28,287.57 

53.6 

14 

L&T India Large Cap Fund - Direct Plan 

685.05 

50.52 

23 

HSBC Large Cap Equity Fund - Direct Plan 

746.17 

51.88 

22 

Nippon India Large Cap Fund - Direct Plan 

10,523.62 

59.74 

DSP Top 100 Equity Fund - Direct Plan 

2,845.05 

52.5 

18 

HDFC Top 100 Fund - Direct Plan 

19,956.83 

54.42 

10 

JM Large Cap Fund - Direct Plan 

49.89 

38.28 

28 

Indiabulls Bluechip Fund - Direct Plan 

102.52 

42.71 

27 

Taurus Largecap Equity Fund - Direct Plan 

31.79 

43.69 

26 

*equal-weighted rating of three agencies

From the above table what we can see is that there is no correlation between ratings of the funds and their returns.  
 
For example, Nippon India Large Cap fund has a consistent rating of two by all the agencies and the fund has delivered the second-best return in its category. Therefore, apply your discretion and go through the risk measures and portfolio before investing in a fund. 

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