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Quartile ranking assigns a mutual fund a position of Q1, Q2, Q3, or Q4 within its peer group (SEBI sub-category), based on a specified return metric over a defined period. Q1 = top 25% of performers; Q4 = bottom 25%.
Peer Group Definition
SEBI's Categorization and Rationalization Circular (SEBI/HO/IMD/DF3/CIR/P/2017/114, 6 October 2017) defines 36 mutual fund sub-categories across equity (10), debt (16), hybrid (6), solution-oriented (2), and other (2) buckets. Quartile rankings are computed within each sub-category, not across all equity funds. For example, a large-cap fund is ranked against other SEBI-classified large-cap funds only — not against mid-cap or flexicap funds in the same broader equity universe.
Each sub-category must have a minimum of 4 schemes to compute quartiles meaningfully. Very small categories (e.g., Value/Contra, currently ~10 schemes) may show quartile bands of 2–3 schemes each.
How Quartile Rankings are Computed
- Collect all schemes in the SEBI sub-category.
- Compute the selected metric (trailing 1Y/3Y/5Y CAGR, Sharpe, or rolling return) for each scheme using growth-option, direct-plan NAV.
- Sort descending by the metric.
- Divide into four equal bands: top 25% = Q1, 25–50% = Q2, 50–75% = Q3, bottom 25% = Q4.
If a category has 40 schemes: Q1 = top 10, Q2 = 11–20, Q3 = 21–30, Q4 = bottom 10. For non-divisible counts (41 schemes), rounding convention varies by provider.
Worked Example (Indian Context)
SEBI sub-category: Large Cap Fund. Schemes classified: 28 (as of AMFI data, Dec 2025). Metric: 3-year trailing CAGR (direct, growth option). Sorted descending:
- Ranks 1–7: Q1 (top 25%) — e.g., Mirae Asset Large Cap, Axis Bluechip, Canara Robeco Bluechip
- Ranks 8–14: Q2
- Ranks 15–21: Q3
- Ranks 22–28: Q4
A fund in Q1 on 3Y CAGR is not guaranteed to remain Q1 on 5Y CAGR — category rank persistence studies (SEBI-AMFI 2022 active fund performance study) show that fewer than 40% of top-quartile funds on a 3-year window remain top-quartile in the next 3-year window.
Quartile Ranking vs. Star Rating
| Metric | Scale | Basis | Provider |
|---|---|---|---|
| Quartile Rank | Q1–Q4 | Single metric (return or Sharpe) in SEBI sub-category | AMFI, MintByte, Value Research |
| Star Rating | 1–5 stars | Multi-factor risk-adjusted composite (Morningstar RR) | Morningstar India |
| Rank Percentile | 1–100% | Same as quartile but higher granularity | AdvisorKhoj, Groww |
Caveats
Quartile ranking is highly sensitive to the period chosen (1Y, 3Y, 5Y) and the metric (absolute CAGR vs. risk-adjusted return). A fund can simultaneously be Q1 on 5Y CAGR and Q3 on 3Y Sharpe. SEBI's categorization circular constrains the peer group but does not standardise the ranking methodology — different platforms may show different quartile assignments for the same fund on the same date. Always note the period, metric, and peer group when using quartile data.
Related terms: CAGR, Rolling Returns, Sharpe Ratio, Alpha, TER.
Primary source: SEBI Categorization Circular SEBI/HO/IMD/DF3/CIR/P/2017/114: sebi.gov.in — Categorization and Rationalization of MF Schemes. AMFI sub-category data: amfiindia.com.
Past performance is not indicative of future returns. Mutual fund investments are subject to market risks. Read all scheme-related documents carefully. ARN-314872. APMI APRN-01658. Content is informational and not investment advice.