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The Equitymaster Research Digest

Are Indian Value Investors Living in a Fool's Paradise?
Nov 4, 2016

'If you are a value investor in India, you will have a hard time doing well.'

Don't worry - that's not us making that claim. We have had no change of heart. We're still the consummate value investors you've come to know and love.

This shocking assertion comes from one of India's leading business dailies.

Here's the gist: Relying on a research report by a leading brokerage, the newspaper has announced that value investing has no future in India.

As per the article, the universe of the cheapest stocks in India consist of genuine value traps. Therefore, a portfolio born out of such stocks will die a premature death as valuations will always remain depressed.

On the contrary, buying quality stocks for the long term is a much better idea even though we may have to pay an expensive looking price for them.

Setting the Record Straight

We think the argument is flawed on many counts. Let's tackle two of them here.

The article is giving the impression that value investing is all about buying cheap stocks. And if a person ditches this strategy in favour of quality, he is no longer a value investor.

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