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Summary: It is rating-review season again, and out come the red and green markers. We look at which equity funds climbed the ratings ladder this month, and which one earned a five-star crown. Read on to see who made the cut.
It is that time of the month again. The first week of every month is when we sit down to review our mutual fund ratings, red and green markers at the ready, to see which equity funds earned an upgrade, and which one walked away with the coveted five-star rating.
How we, at Value Research, rate mutual funds
Before we get to the names, a quick word on how we arrive at a rating, because it explains why a fund moves up.
In short:
- For each fund in a category, we calculate a ‘Return Score’ and a ‘Risk Score’.
- We subtract the Risk Score from the Return Score to obtain a risk-adjusted performance measure that forms the basis for the rating. That is really the heart of it: not just how much a fund made, but how much risk it took to get there.
- We then blend two time periods into a single verdict. For equity and hybrid funds, the five-year score counts for 60 per cent and the three-year score for the remaining 40 per cent.
- Younger funds without a five-year record are judged solely on their three-year score.
- The composite score is then translated into a star rating.
Now that you know how Value Research’s ratings work, let’s dive into the equity funds that got a promotion in June.
The tax-savers turn a corner
The two tax-saving funds on the list tell a similar story.
#1 Edelweiss ELSS Tax Saver Fund
This fund spent much of its life either matching or trailing its benchmark, the BSE 500 TRI, and its peers, hardly the stuff of upgrades. But something shifted in December 2025.
The Edelweiss ELSS Tax Saver Fund has been ahead of both ever since, and its five-year rolling return now sits at 13.9 per cent (as of June 4, 2026), against 11.8 per cent for the benchmark (BSE 500 TRI) and a category average of 12.9 per cent.
Its longer-term SIP numbers are still modest: 7 per cent over three years (sixth in the category) and 11.6 per cent over five, but the recent turn is what tipped the scales.
#2 HSBC ELSS Tax Saver Fund
The HSBC ELSS Tax Saver Fund has followed much the same arc as its Edelweiss counterpart. The fund had been lagging both its category and benchmark over five-year rolling periods, only to come good in the past couple of months with a 14.4 per cent return that comfortably outpaced both.
Though its SIP returns are modest, the fund still outperformed its category. Over a three-year period, the HSBC ELSS Tax Saver Fund delivered 8.8 per cent returns, while the category only gave 4.1 per cent. And over five years, the fund returned 13.4 per cent, against the category average of 10.2 per cent.
What’s more, its alpha of 3.8 per cent (the extra return a fund earns over the benchmark for the risk taken) ranks sixth in the category. However, a standard deviation (which measures a fund’s volatility) of 16.5 per cent is on the high side, so this is not a fund for the faint-hearted.
The mid- and small-cap movers
#1 HSBC Midcap Fund
HSBC Midcap Fund tops its category on both three-year (18.3 per cent) and five-year (21.1 per cent) SIP returns. Although performance has been choppy lately, it has lifted again — 20.3 per cent on a five-year rolling basis, against the benchmark BSE 150 MidCap's 17.2 per cent and the category's 17.7 per cent.
The fund also leads on three-year alpha (5.8). Heavy bets on Financials, Industrials and Consumer Discretionary, paired with a lighter hand on Technology, seem to have done the trick.
#2 Bank of India Small Cap Fund
A standout small-cap fund, it has ranked first over a three-year period (14.9 per cent) and fourth over a five-year period (18.8 per cent) in terms of SIP returns.
While the Bank of India Small Cap Fund has seen its share of wobbles since mid-2025, it has managed to beat both peers and benchmark by some distance: a 21.2 per cent return (as of June 4, 2026) versus the category's 18 per cent and the BSE 250 SmallCap TRI's 16.2 per cent. Worth noting, though, that it runs a fairly concentrated book of 82 stocks, with its top three sectors making up close to 63 per cent of the portfolio.
#3 Union Small Cap Fund
This fund forms the quietest of the upgrades. Its SIP returns are respectable, 12.5 per cent over three years and 16.2 per cent over five, but over the longer haul, it has mostly moved in step with its benchmark and category, with few clear spells of outperformance.
Similar to its Bank of India counterpart, the fund is highly concentrated, with just 68 stocks, and the top three sectors accounting for 66 per cent of the portfolio.
A five-star debut
And finally, a fund that deserves a mention of its own. The ITI Flexi Cap Fund is barely three years old and has already earned five stars.
And why not, since it has left both its benchmark, the BSE 500 TRI, and its peers well behind, with three-year rolling returns of nearly 20 per cent against the index's 12.9 per cent and the category's 14.1 per cent. Its three-year SIP return (9.9 per cent) ranks a middling seventh, but with a well-diversified portfolio, this is a young fund worth keeping an eye on.
The stars of the month
These six equity funds saw a ratings upgrade in June
| Fund name | Rating upgrade | Three-year SIP returns (%) | Five-year SIP returns (%) |
|---|---|---|---|
| Edelweiss ELSS Tax Saver | 3 → 4 | 7 | 11.6 |
| HSBC ELSS Tax Saver | 3 → 4 | 8.8 | 13.4 |
| HSBC Midcap | 3 → 4 | 18.3 | 12.1 |
| Bank of India Small Cap | 3 → 4 | 14.9 | 18.8 |
| Union Small Cap | 3 → 4 | 12.5 | 16.2 |
| ITI Flexi Cap | 4 → 5 | 9.9 | - |
| Returns and ratings are for direct plans. SIP returns as of June 8, 2026. ITI Flexi Cap Fund’s five-year SIP returns are not available since the fund has not yet completed five years. |
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Tempted to invest in any of these funds?
While star ratings are one way to gauge a fund’s past performance, they should not alone drive your investing decisions. Factors such as time horizon, risk appetite, budget and financial goals also need to be taken into account before deciding to invest in a fund.
And that is where Value Research Fund Advisor comes in. It can help you work out whether a fund actually fits your goals before you commit a rupee to it.
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