The Value of Value Investing in India


If you have been keeping a tab on the share market and the popular memes around it, the one that the government will soon declare ITC’s stock as the new ₹ 200 currency note took the cake. Why are we telling you this? Because we consider ITC as a part of the value investing group of stocks. Do all such shares perform similarly? Not really.

Another example of a value stock is that of Infosys. If someone had invested around ₹ 10,000 in 1993 to buy 100 shares, the share count would have crossed 1 lakh by now. The valuation? Over ₹ 2 Crore.  

Now that you have seen two contrasting pictures of value investing, let us delve deeper.

The basics of value investing, an idea developed by Benjamin Graham in 1930 and popularized by the stock market maestro Warren Buffet, is simple – you find a stock trading lower than its intrinsic (real) value and buy it. It is a long-term approach where we believe that the share will sustain the market volatility and continue to grow.

Is it popular in India?

People worldwide are fond of rice, even though the name may vary. Similarly, no one likes to buy an overpriced stock and then wait for their money to tank. We all look for underpriced shares with robust fundamentals for our investment, even though we may not tag it as value investing.

But unlike many other countries, India has not taken value investing like it ought to be. Not that we say that the concept has brought in tremendous results. 

But Indian stock market investors, especially after receiving unbelievable gains in the last two years before the pandemic, had a shift in their mindset. They started expecting great things from every stock they owned and forgot that the stock market is not like cryptocurrencies and that they won’t see a 5% gain or loss every day.

So the investors repeatedly forget to look into the fundamentals and fall victim to the sentiment. They end up making a millionaire out of a basic stock and often drag a good equity share down to its knees. Where is the value in such behaviour?

The idea of value investing is yet to spread its wings in India the way it has in many other countries. Given the early reception, it seems to be an uphill task. 

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