Sortino ratios: the same top ten as Sharpe, scaled up

The number

Across 264 diversified equity funds, the median three-year Sortino ratio on NAVs to 6 October 2026 was 0.53. Seventeen funds were at 1.0 or above, 141 at 0.5 or above, and 6 were below zero.

The Sortino ratio keeps the top half of the Sharpe ratio, the fund's annualised three-year return minus a 6.5% risk-free rate, and changes the bottom. Instead of the volatility of every daily return, it divides by the downside deviation: only the days on which the fund did worse than that 6.5% annual rate count. Invesco India Mid Cap, for example: (22.42% - 6.5%) / 12.29% = 1.30.

The funds are the same set as our Sharpe ratio post: Direct plan, Growth option, open-ended, with sectoral and thematic funds left out.

By category

Contra funds (3) are left out for size; their median was 0.62.

The order of the categories is exactly the Sharpe order. The Sharpe medians are a little higher than in the earlier post, which used figures for 1 October: a three-year window that ends a few days later starts a few days later too, and the overall median Sharpe is now 0.39 against 0.35 then.

The same leaders

These are the ten funds with the ten highest Sharpe ratios, in a slightly different order. Invesco India has four of them, as it did on Sharpe, and DSP Value is again there on low risk: its downside deviation of 8.02% is the second-lowest of all 264 funds, behind only Parag Parikh Flexi Cap's.

Across the whole list, no fund moves more than nine places between its Sharpe rank and its Sortino rank.

Why the two agree

For every one of the 264 funds, the downside deviation came to between 70% and 77% of its volatility, with a median of 74%. A fund whose daily falls mirrored its daily gains would sit at about 71%, so these funds are all close to that. When the bad days are a steady share of all the days, dividing by them instead of by all of them scales every fund's ratio up by 1.3 to 1.4 times and leaves the order nearly unchanged.

The differences sit at the edges of that range:

• Motilal Oswal Midcap had the smallest share of downside, 70% of its volatility, so its Sortino (0.93) gains most on its Sharpe (0.65).
• ICICI Prudential Value moves up nine places, from 132nd on Sharpe to 123rd. Its downside deviation of 8.10% is the third-lowest in the group.
• Bank of India ELSS Tax Saver moves down nine, from 167th to 176th. Its downside was 76% of its volatility.

A fund whose ups were much larger than its downs would score far better on Sortino. Over these three years, none of these funds looked like that.

At the bottom

Six funds had a negative Sortino ratio, all because their three-year return was below 6.5%. Samco ELSS Tax Saver was lowest at -0.18, on a return of 4.05% a year and a worst fall of 29.6%.

A negative Sortino is more negative than the matching Sharpe (Samco's was -0.14), for the same reason a positive one is larger: the denominator is smaller.

Among large cap funds, the median was 0.28 and the highest was Taurus Large Cap's, at 0.69.

What this does not tell you

The target is a choice. We count a day as "downside" when it fell short of a 6.5% annual rate. A target of zero would count fewer days, and the positive ratios would all be larger.

Three years is one window. The window here runs to 6 October 2026. Moving its end by a few days moved some funds' ratios noticeably, as the comparison with 1 October shows.

It does not describe the size of a fall. Downside deviation averages the bad days; it does not say how deep the worst stretch went. Bank of India Small Cap's ratio of 1.13 came with a worst three-year fall of 27.1%.

It is not a ranking of what to hold. A large cap fund and a small cap fund do different jobs, and none of this is a recommendation to buy or sell any fund.

Where to go from here

The Sortino screen applies the measure across every category, with a cut-off of 2 that none of these 264 funds reaches. The guide to risk-adjusted returns covers the arithmetic behind both ratios, and our capture ratio post looks at up and down months against each fund's benchmark, a different way of separating the good days from the bad.