The Value Factor

Value investing has the longest documented history of any factor. Benjamin Graham was writing about it in the 1930s. Warren Buffett has practised it for 70 years. Fama and French formalised it academically in 1992. And yet, value spent the entire decade of 2010 to 2020 underperforming growth stocks in the US by a historic margin, leading many to declare it dead.

It wasn't dead. It came back hard from 2021 as interest rates rose and expensive growth stocks were re-priced. India saw the same turn: over the five years to September 2026, NSE's Nifty200 Value 30 returned 22.9% a year on total return, against 8.3% for the Nifty 200. Then, in the six months to October 2026, it was the worst factor index on the board. Value tests patience like nothing else.

Here is what value really is, how to measure it properly in Indian markets, why cheap isn't always cheap, and how to use value intelligently as part of a systematic strategy.

What value investing actually means

At its core, value investing is simple: you're paying a low price relative to the underlying fundamental worth of the business. The more you pay above intrinsic value, the more expected return you're giving up. The less you pay, the more return you're setting yourself up for, as the price mean-reverts to fair value over time.

The academic foundation: Fama and French

In 1992, Fama and French showed that book-to-market ratio (B/M, the inverse of P/B) was one of the most powerful predictors of stock returns. High B/M stocks (cheap relative to book) earned significantly higher returns than low B/M stocks (expensive relative to book) over the following period.

Their explanation: value stocks are riskier, they tend to be financially distressed companies, and their higher returns compensate investors for bearing distress risk. The behavioural explanation: investors overpay for growth and underpay for boring, cheap stocks due to extrapolation bias. Both explanations are likely partially true.

How to measure value in Indian markets

Value has many faces. No single metric captures it perfectly. Here are the primary measures used in systematic value strategies, with India-specific context:

The value trap: cheap doesn't always mean opportunity

The most dangerous pitfall in value investing is the value trap, a stock that appears cheap on traditional metrics but is cheap for good reason. The business is permanently impaired, not temporarily out of favour.

Indian examples of value traps:

• Yes Bank, looked cheap on price to book for much of 2019. The book value itself was overstated by loans that had not yet been recognised as bad. In March 2020 RBI stepped in with a reconstruction plan, and shareholders were heavily diluted.
• DHFL, looked cheap on earnings for years before its collapse. It went through insolvency, and its shares were extinguished and delisted in 2021. The low valuation was a warning, not a bargain.
• Telecom, 2017 to 2019, several listed operators looked cheap on every metric after a price war reset the industry's economics. Cheap stayed cheap, and some of those businesses did not survive in their old form.

How systematic value strategies avoid traps: by combining value signals with quality filters. Stocks that are cheap AND financially healthy (low debt, profitable, stable earnings) are genuine value opportunities. Stocks that are cheap AND financially stressed are potential traps.

1. Rank on valueP/E, P/B and EV/EBITDA together, never one alone.
2. Check the balance sheetDrop high debt and weak interest cover.
3. Check the earningsDrop losses, one offs and erratic profits.
4. Check governanceDrop pledged promoters and audit red flags.
5. Hold what is leftCheap and healthy: value, not a trap.

The decade of underperformance, and what it tells us

From 2010 to 2020 in the US, value lagged growth by an extraordinary margin. Technology companies compounded at 25%+ annually while traditional value sectors stagnated. This was the longest and deepest drawdown of the value premium in recorded history.

Three reasons this happened:

• Ultra-low interest rates, low rates disproportionately benefit long-duration assets (growth stocks). When discount rates fall, the present value of far-future cash flows rises more than near-term cash flows, favouring growth over value.
• The rise of intangibles, traditional book value captures physical assets but misses brands, software, and intellectual property. Many "expensive" growth stocks were actually cheap when measured against their true economic assets.
• Genuine disruption, some traditional value sectors (retail, media, banking) faced genuine structural threats from technology, not just cyclical underperformance.

Value in Indian markets, the data

Two things are true at once in that row. Value has been the best performing factor in India over five years, and it was the worst over the most recent six months. That is value. The cheap stocks were cheap for a reason in 2020, re-rated through 2025, and gave some of it back in 2026 when the market's mood shifted again.

A worked example: is the market cheap?

Flip a P/E upside down and you get the earnings yield: what the business earns each year per ₹100 of price. On 9 October 2026 the Nifty 50 traded at a P/E of 19.27, an earnings yield of 5.2%. The 10 year government bond yielded about 7.2%. The value index, at a P/E of 8.69, offered an earnings yield of 11.5%. That gap is what a value investor is paid to accept the risks of owning out of favour businesses.

Common mistakes with value

How this shows up in RupeeCase

The current RupeeCase lineup is built mainly on momentum, not value, and each strategy page says so. Value still matters to you as an investor in it, for two reasons. First, the momentum and value cycles often run against each other, as the chart above shows, which is why a pure momentum strategy can lag when value leads. Second, the multi asset versions, like Allcap Multi Asset, add debt and gold to soften those swings instead of adding a value tilt. If you want explicit value exposure, it would sit alongside, not inside, these strategies.