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Value investing in India: valuation, statements and the value factor

Value investing favours stocks that are cheap against their earnings, book value or cash flow, on the evidence that cheap stocks have tended to catch up over long periods. The modules and guides below cover the value factor, the valuation ratios, the Nifty PE record and how to read the statements those ratios come from.

10 pages and terms
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4 questions answered

2Guides

Long form answers with worked Indian examples.

4Learn modules

Free lessons with a quiz and a certificate.

3Glossary terms

The words, in plain language.

Value factor: Tendency of stocks with low price-to-earnings or price-to-book ratios to outperform over long horizons.
P/E ratio: Price-to-Earnings ratio. Stock price divided by earnings per share.
P/B ratio: Price-to-Book ratio. Stock price divided by book value per share.

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Questions about value investing

What is the value factor?

A ranking of stocks by price against fundamentals, such as earnings, book value or cash flow. A value portfolio holds the cheapest part of the ranking.

What do P/E and P/B tell me?

P/E is the price paid for each rupee of earnings and P/B for each rupee of book value. The guide shows how to read both by sector.

Is a low P/E always cheap?

No. Earnings at a cyclical peak make P/E look low. The valuation module covers ranges instead of single point targets.

Where do the numbers come from?

From the company’s financial statements and annual report. Modules 1.4 and 9.6 walk through reading them.

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