CRISIL Rating for Mutual Fund

Updated on: Jan 11th, 2022


8 min read

Just like CIBIL assesses the creditworthiness of individuals, CRISIL does the same for mutual fund companies. CRISIL is an internationally renowned rating agency. We have covered the following in this article:

Credit Rating Information Services of India

CRISIL is a global credit rating agency for financial institutes and financial instruments. The Credit Rating Information Services of India Limited offers a myriad of financial services. This rating shows how likely a particular mutual fund is going to deliver the returns on time and within the policy framework. They enjoy great acknowledgement among investors, intermediaries and fund houses for mutual fund analysis and ratings.


Credit Rating Information Services of India Limited


Rating of the Corporate and Financial Sector Entities, MSMEs, Corporate Bonds, Long term debt capital market instruments, Debentures, Fixed Income Securities, Foreign Currency Convertible Bonds issued by Indian Companies, Inflation-Indexed Bonds, FD programmes for Financial Entities, PTCs, Ranking of Mutual Funds and ULIPs and Real Estate Projects, MFIs, Renewable Energy Companies and Educational Institutions among others.


Business Risk and Financial Risk Analysis, Competitive Market Position, Companies management policies and strategies, Risk associated with projects funding, implementation and marketing, Company’s ability to service debt, Stability of Company’s cash flows and business strengths


These ratings show you the safety of the instruments rated by Crisil. Crisil AAA shows the highest safety, Crisil AA shows high safety, Crisil A shows adequate safety, Crisil BBB shows moderate safety, Crisil BB shows moderate risk, Crisil B shows high risk, Crisil C shows very high risk and Crisil D shows Default. 

CRISIL Parameters to Rate Mutual Funds

CRISIL ratings for mutual funds disclose all the variables in their rating methodology description. They only rate open-ended schemes, and they rank mutual funds based on a set of parameters as listed below.

Superior Return Score (SRS)

SRS denotes the fund’s returns and risks in comparison with other similar portfolios. Example, you cannot compare a large-cap fund with a mid-cap fund. The only apple to apple comparison works here.

Portfolio Concentration Analysis

Concentration, here, means the risks faced due to over-diversification. For example, if one invests in too many funds to diversify the portfolio, you might end up having similar stocks, which defeats the purpose.

Mean Return & Volatility

CRISIL considers only mean return and volatility for equity funds, short-term debt funds and credit opportunities funds. Mean return is the average daily returns based on the NAV, while volatility is the degree of fluctuations in returns.

Quality of Assets

Asset quality calculates the possibility of default by the debt security issuer to honour the timely debt repayment.

Exposure to Sensitive Sector

For debt funds, CRISIL takes industry risks into account and give the fund an Industry Risk Score (IRS). This score analyses the effect of different variables on industry and the debt repayment capacity of organizations in a given time horizon.

Liquidity Analysis (LA)

It assesses the ease with which a fund house can liquidate a portfolio. The lower the score, the more liquid the fund is. For instance, the LA of equity funds is based on the number of days it takes to liquidate the portfolio.

Tracking Error


Index funds use this parameter to estimate how much a fund’s performance can fluctuate regarding the index that it tracks. A lower tracking error is a positive indicator

How CRISIL ranks Mutual Funds

While most ranking models use either returns or net asset value (NAV) for the purpose, CMFR evaluates both NAV and portfolio-based attributes. This presents a single-point analysis of mutual funds by considering the quality of the asset, risk-adjusted returns, liquidity, and asset concentration. The rating agency assigns ranks or star-ratings to mutual funds on a scale of 1 to 5.
For instance, CRISIL Fund Rank 1 indicates ‘excellent performance’ – top 10 percentile of funds in any peer group. The next 20 percentile falls under CRISIL Fund Rank 2.

CRISIL Rating from 1-star to 5-star

CRISIL’s ratings are based on different time frames, namely three years, five years or ten years. Combinations of these timelines give a single measure of risk-adjusted performance of a fund. After calculating the ratings, the agency sets stars to these funds as per their respective percentiles.

While the top 10% of funds get 5-star ratings, the bottom 10% of funds are given a 1-star rating. The rating is a composite measure of both return and risk, which helps investors to figure out the ability of the funds to deliver returns, even with various risks involved.

Examples of how CRISIL Rates different Mutual Funds




Money Market

TATA Equity PE Fund- Rank 1Franklin India Low Duration Fund- Rank 1HDFC Balanced Fund- Rank 1Indiabulls Liquid Fund- Rank 1
DSP BlackRock Opportunities Fund- Rank 2BOI AXA Corporate Credit Spectrum- Rank 2 DSP BlackRock Balanced Fund- Rank 2Axis Liquid Fund- Rank- 2

CRISIL Rating – what it means to investors

CRISIL rating is highly reliable if you seek an elaborate and thorough rating practice because they check every variable possible, and this is why many fund houses use CRISIL ranking as one of their USPs. However, this rating will not point towards a fund with more return potential. Ratings alone cannot be considered as a performance indicator, thanks to unpredictable markets.

So, it is always a good idea to look at other assessment metrics. If you find the entire process to be cumbersome, then you can check out our well-researched and hand-picked mutual funds. These are selected from the top fund houses in the country based on CRISIL, past performance, liquidity, and Sharpe Ratio, among other metrics.

In short, CRISIL’s reputation for unbiased ratings and benchmarks made it a premier and globally recognised rating agency. No wonder many seasoned investors, as well as first-timers, choose to check the ratings and ranks before selecting a mutual fund.

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Quick Summary

CRISIL assesses mutual fund companies' creditworthiness using a rating scale from AAA to D, considering parameters like business and financial risks. They rank mutual funds based on variables like return scores and asset quality. CRISIL's ratings range from 1 to 5 stars over different time frames, aiding investors in evaluating performance and risk. The agency is trusted for comprehensive and unbiased evaluations, but additional metrics should also be considered.

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