Star Ratings are not the best way to pick any fund. These are quantitative, and only reflect a part of the past, looked at from a certain angle. To pick a fund, in my opinion, one should start with a qualitative analysis. Morningstar, in addition to its star ratings, also offers qualitative ratings that are called 'Analyst Ratings
.' This, in my understanding, is the easiest accessible qualitative analysis of funds in India.
Once you have shortlisted a few funds based on that, you could consider diversification across 3-5 fund houses which, in my opinion, should be adequate.
For funds not covered in Morningstar's analysis, there is no easy way for performing qualitative analysis. Familiarity with the fund managers, their experiences, style and preferences, along with the processes followed is essential to do such an analysis.
Interpreting portfolio holdings in a fund can be a tricky thing. The portfolio reflects what a fund holds on a given date. What is not known is why are these there, and what does the fund manager/ team propose to do with these.
Morningstar's qualitative analysis, as far as I understand, does examine the thinking of a fund manager/ team and therefore factors in the 'why' of portfolio holdings in its final verdict.