QVGS ValueScore

Construction

The ValueScore Indicator is constructed using Fundamental, Quantitative, and Technical inputs. The indicator is computed quarterly and classifies Indices and Stocks into 6 buckets at a point in time assigning them a score of 0 to 5 as follows:

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

The ValueScore indicator can be applied in 2 ways:

1. Passive Value
2. Active Value

Application

The ValueScore indicator is useful for long to medium-term investing.

Typical entries for long positions arise in the Fair & Deep Discount bucket. These can be carried till the Trending bucket is held. A move from the Trended bucket to the Highly Expensive bucket indicates a sell / short position entry.

The detailed construction and interpretation notes of QVGS ValueScore can be understood through the link below.

Passive Value is computed on broad market indices – the NIFTY 500 for Indian Equities and the S&P 500 for U.S. Equities as below:

• Buckets of 0 and 1 represent a discounted valuation of the market.
• Bucket 2 represents a Fairly Valued market.
• Buckets 3 and 4 indicated an Expensive valuation.
• Bucket 5 represented a Trended market implying an increase in the valuation of the market as a whole.

Active Value is computed on the stocks comprising the NIFTY 500 for Indian Equities and the S&P 500 for U.S. Equities. What percentage of the market exhibits Discounted Valuation is indicative of whether capital should be deployed on held on to.

• Shades of green/blue represent discounted valuations.
• Yellow represents fair valuatuion.