ValueScore

Describing passive and active value investing opportunities in Indian Equities for the long-term. Updated Monthly using Quantamental Investing®.

QVGS ValueScore

The Value Cycle is described by the ValueScore Indicator constructed using Fundamental, Quantitative, and Technical inputs. Computed quarterly for long-term investing, the ValueScore Indicator classifies Indices and Stocks into 6 buckets at a point in time:

Bucket(Score)
Deep Discount(0)
Fair Discount(1)
Right Priced(2)
Fairly Expensive(3)
Highly Expensive(4)
Trended(5)

Typical entries for long positions arise in the Deep Discount bucket. These can be carried till the Trending bucket is held.

A move from Trended bucket to Highly Expensive bucket indicates a sell / short position entry. This position can be carried till a Fair Discount or Deep Discount valuation.

The indicator can be interpreted in 2 ways.

  1. Classifying which bucket of the Value Cycle does a specific market cap fall in at a point in time. This describes the state of passive investing, Q-o-Q.
  2. Classifying what percentage of individual stocks fall into each bucket of the Value Cycle. This describes the state of active investing, Q-o-Q.
Passive Value Outlook

Market-cap Based Indices

The QVGS ValueScore Indicator is updated monthly. The last data point is the latest month of the current running quarter. Last Updated: 31-05-2022

COMMENTARY

The QVGS ValueScore Indicator across market caps has been steadily declining from Trended in Sep-21 End to Right Priced in the Current Quarter (till the end of  May-22).

The trend indicates that market cap and stocks are either likely to move sideways to a Fair Discount valuation or fall to a Deep Discount Valuation.

INTERPRETATION NOTES

Valuation of various Market Caps oscillates between Deep-discount valuation at one end, where equities are available at a bargain, at one end. The other end is Trended,  where equities have an actual increase in value.

The mean valuation of Right Priced. This central point is often overshot to reach extreme ends.

The extreme ends are points from where reversion to the mean can be expected. Such points indicate a good time to change stance from long to short and vice versa.

This indicator gives insight into the passively managed equity space.

Active Value Outlook

NSE 500 Stocks

The QVGS ValueScore Indicator is updated monthly. The last data point is the latest month of the current running quarter. Last Updated: 31-05-2022

COMMENTARY

The bulk of stocks comprising the NIFTY 500 that was at (Fairly Expensive + Right Price = 69.14%) in the last quarter (ending Mar-22).

These have moved to (Right Priced + Fair Discount = 63.01%) in the current quarter to date (till the end of May-2022).

As more stocks move into the Deep Discount bucket, the shift indicates a slowing trend and mean-reversion tendency of stock valuations.

Highly attractive valuations are yet to be achieved across the cross-section of the markets.

INTERPRETATION NOTES

Comparing the valuation of individual stocks comprising the NSE500 Index on a Q-o-Q basis gives a non-market cap weighted picture of the cross-section.

By comparing the valuation bucket of the bulk of the stocks, a larger picture of the trend emerges which may converge or diverge from the picture painted by the broad-market indices.

This valuation gives insight into the actively managed investment space (where weights allocated to stocks differ from the index). This picture may diverge from the passively managed investment space.

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