CRISIL mutual funds' ranking for June quarter: A deep dive into ratings and key scenarios

In the world of investment, understanding how a fund's performance is evaluated is crucial for both investors and fund managers alike. CRISIL has brought an unique perspective to fund ranking that goes beyond traditional performance metrics. Jiju Vidyadharan, Senior Director-Funds and Fixed Income at CRISIL Market Intelligence & Analytics, recently shared the distinctive approach employed by CRISIL in assessing funds' success.

CRISIL's approach to fund ranking sets it apart from conventional evaluations. Unlike other ranking systems that solely focus on performance, CRISIL delves deeper into both performance-based and portfolio-based parameters.

Jiju Vidyadharan emphasized that CRISIL's methodology is tailored to each specific category of funds. This approach acknowledges that different fund categories have distinct investment objectives and risk profiles, necessitating a customized evaluation.

“We look at parameters which are relevant from a specific category,” he said.

One intriguing aspect of CRISIL's assessment is its consideration of portfolio turnover, as illustrated by the HDFC Midcap Opportunities Fund. The fund's significantly lower portfolio turnover indicates a prolonged holding period for its constituent stocks. This deliberate approach showcases the portfolio manager's conviction in the selected stocks, implying a strong belief in their long-term potential.

Jiju Vidyadharan acknowledged that a fund's performance is a composite outcome of well-timed sectoral calls and strategic investments in specific companies. The success of HDFC Midcap Opportunities Fund, for instance, was attributed to a mix of favorable sectoral movements and astute investments.

“The fund has come on top primarily driven by the performance which is a factor of both sectoral calls that have paid off as well as specific investments into companies or scrips,” he said.

This fusion of sectoral analysis and individual stock selection showcases the multifaceted approach that CRISIL embraces.

In recent times, the Quant Midcap Fund faced a challenge in its CRISIL ranking due to its unique exposure profile. Unlike the industry average, the fund exhibited a larger exposure to large-cap stocks and minimal exposure to small-cap stocks, a segment that had demonstrated robust performance. Jiju Vidyadharan pointed out that these exposure factors played a role in the fund's ranking adjustment, underscoring CRISIL's keen attention to portfolio composition.

“These two factors have contributed to the fund falling a notch in the CRISIL rankings,” he said.