When you’re browsing for a new fund on the MO Riise app, it’s hard to miss the bright stars or rankings from agencies like CRISIL or Morningstar. For many beginners, these stars act like a shortcut. A 5-star fund must be better than a 3-star fund, right?

Well, not exactly.

Think of a fund rating like a Report Card. It tells you how a student performed in the past semester. While it suggests they are good students, it doesn’t guarantee they’ll top the next exam. we will pull back the curtain on how these ratings are calculated and, more importantly, how much you should actually trust them in 2026.

Open Demat account -  Begin your investment journey now!

CRISIL vs. Morningstar: The Battle of the Math

While both agencies aim to identify good funds, they use slightly different secret recipes to get there.

Comparison of Methodologies

How CRISIL Rankings Work (The Peer Group Test)

CRISIL doesn't just look at who made the most money. They compare funds against their direct peers (e.g, comparing a Midcap fund only to other Midcap funds).

• The Top 10%: Only the top 10% of funds in a category get the coveted CRISIL Rank 1.
• Liquidity Check: One unique thing about CRISIL is their LiquidityAnalysis. They check how easily a fund can sell its stocks if everyone decides to withdraw their money at once.
• Consistency: They penalize funds that are one-hit wonders. They prefer funds that have shown steady performance over 3 or 5 years.

How Morningstar Ratings Work (The Risk-Reward Balance)

Morningstar is famous for its Risk-Adjusted Return math. They believe a fund that earned 15% with low stress is better than a fund that earned 15% with heart-attack-inducing volatility.

• The Bell Curve: They distribute stars based on a fixed curve.

  • 5 Stars: Top 10%
  • 4 Stars: Next 22.5%
  • 3 Stars: Middle 35%

• The Medalist Rating (New for 2025): Beyond just stars, Morningstar now gives Gold, Silver, and Bronze medals. This is their forward-looking view, where their analysts actually look at the Fund Manager's skill and the Parent Company's culture.

How reliable are these ratings?

This is the billion-dollar question. Here is the honest truth for 2026:

The Good:

• Initial Filter: They are excellent for narrowing down 2,000+ funds to a shortlist of 20.
• Red Flag Detector: A sudden drop from 5 stars to 2 stars is a great warning light to check if your fund manager has left or if the strategy has changed.

The Bad:

• Rear-View Mirror: Ratings are based on past data. Markets change. A 5-star fund from 2024 might struggle in 2025 because its investment style (like IT or Pharma) has gone out of fashion.
• The Mean Reversion Trap: Often, a fund gets 5 stars exactly when it is at its peak. Sometimes, the best time to buy is actually when a high-quality fund is temporarily at 3 stars and cheap.

Your 3-Step Strategy for 2026

1. Don't Buy on Stars Alone: Use them as a starting point, not the final decision.
2. Look for 3-Year Consistency: A fund that has been a Rank 1 or Rank 2 for three years straight is much more reliable than a fund that just jumped to 5 stars this month.
3. Check the Parentage: At Motilal Oswal, we emphasize the AMC Quality. Ratings can change, but a strong investment philosophy like QGLP lasts much longer.

Conclusion: Use the Map but Watch the Road

Ratings are like a GPS; they show you where the road has been and where it’s likely to go. But as the driver, you still need to look out the windshield. In 2026, use CRISIL and Morningstar ratings to filter out the noise, but always ensure the fund aligns with your own goals and time horizon.

Suggested blogs: Beginners guide to Mutual funds | Mutual funds units - Calculation & How does it work? | What is an ideal portfolio asset allocation or breakup?

Frequently Asked Questions (FAQs)