Piotroski F-Score in India: The Score That Doesn't Work
The Piotroski F-Score inverts in India. Score 8-9 returned 2.2% CAGR over 27 years on NSE. Score 0-2 returned 9.4%. The spread is -7.2%. Both trail the Sensex (10.9%). India's growth-driven market punishes the quality signal.
The Piotroski F-Score does not work in India. Over 27 years on NSE, high-scoring value stocks (Score 8-9) returned 2.2% annually. Low-scoring stocks (Score 0-2) returned 9.4%. The spread is negative: -7.2%.
Contents
- Method
- What We Found
- Alpha decomposition
- Why the F-Score fails in India
- The Avoidance Signal Doesn't Help Either
- Part of a Series
- Limitations
This isn't a marginal failure. The strategy inverts. Buying the "best" value stocks by Piotroski criteria produced worse returns than buying the "worst." And both trail the Sensex (10.9%).
Data: FMP financial data warehouse, 1998–2024. Updated May 2026.
Method
Data source: Ceta Research (FMP financial data warehouse) Universe: NSE-listed stocks, value universe (bottom quintile by price-to-book), market cap above local threshold Time period: 27 years (1998-2024) Rebalancing: Annual (April, after annual reports) Execution: Next-day close (MOC) Benchmarks: All value stocks (same universe, unfiltered), Sensex Avg holdings post-2010: 14 stocks per year Data quality: Phantom adjClose oscillations removed, returns filtered for price artifacts
Same nine-signal methodology as our US study.
What We Found
| Portfolio | CAGR | Volatility | Sharpe Ratio | Max Drawdown |
|---|---|---|---|---|
| Score 8-9 | 2.2% | 41.6% | -0.103 | -75.0% |
| Score 0-2 | 9.4% | 55.6% | 0.052 | -80.7% |
| All value stocks | 6.3% | 48.7% | -0.003 | -66.3% |
| Sensex | 10.9% | 31.7% | 0.138 | -41.4% |
The results are stark. Score 8-9 stocks had a negative Sharpe ratio (-0.103), meaning the risk-free rate beat them after adjusting for volatility. Maximum drawdown hit -75.0%. Volatility ran at 41.6%.
Meanwhile, Score 0-2 stocks returned 9.4% annually, the unfiltered value universe returned 6.3%, and the Sensex returned 10.9%. The F-Score's high-quality picks were the worst option in the Indian market.
Alpha decomposition
- Selection alpha: -4.1% per year (Score 8-9 vs All value)
- Avoidance alpha: -3.0% per year (All value vs Score 0-2)
Both signals are negative. The F-Score actively steers you toward the worst-performing segment of Indian value stocks, AND filtering out the lowest-scoring stocks hurts rather than helps. This is the only major market where the avoidance signal also fails.
Why the F-Score fails in India
Several structural factors explain the inversion.
Small sample, high concentration. With only 14 qualifying stocks per year post-2010, a handful of names can dominate returns. India's value universe is thinner than the US or Japan, and the 8-9 score threshold creates a very concentrated portfolio.
Growth-driven market. India's equity market rewards growth and momentum. Companies with improving fundamentals (which is what the F-Score measures) are often already re-priced by the time annual financials are published. The value universe's best returns come from turnaround stories that start at rock-bottom scores and re-rate sharply. These are exactly the stocks the F-Score tells you to avoid.
Capex cycle penalty. The F-Score penalizes companies for increasing debt, issuing new shares, and short-term margin compression. In India's growth economy, companies funding capacity expansion or going through investment cycles get scored down. Those investments often pay off two or three years later, after the F-Score has already steered you away.
Volatility penalty. At 41.6% annual volatility, the Score 8-9 portfolio is whipsawed by India's periodic market dislocations. The worst drawdown hit -75.0%. A concentrated portfolio of "fundamentally improving" small-cap value stocks in India couldn't survive that kind of drawdown path.
The Avoidance Signal Doesn't Help Either
The previous version of this blog argued the avoidance signal still had value in India. With corrected execution (next-day close, not same-day) and data quality guards in place, that's no longer true. The all-value universe returned 6.3% vs Score 0-2's 9.4%. Removing low-scoring stocks made things worse.
The simplest takeaway for Indian value investors: don't use the F-Score. Neither tail of the score distribution gives you what you want here.
Part of a Series
This is one of several regional Piotroski F-Score studies. The US analysis covers 28 years and shows large-cap value losing to SPY: Piotroski F-Score: 28 Years of US Data on a 9-Point Quality Checklist.
India's -7.2% spread is the worst of any market we tested. See our global comparison for the full breakdown across all exchanges.
Limitations
Thin portfolio. 14 stocks per year post-2010 is a small sample. Individual stock outcomes can swing annual returns by double digits. Results are less statistically robust than markets with deeper coverage.
Rupee-denominated returns. All returns are in local currency. India's rupee has depreciated against USD over most of the study period, which affects international comparisons.
Survivorship. Indian exchanges have seen significant delisting and restructuring. While delisted stocks are included where data exists, earlier periods may have survivorship bias.
No sector balancing. India's value universe concentrates heavily in financials and materials. The F-Score results may partly reflect sector-specific dynamics rather than a pure quality signal.
Data: Ceta Research, FMP financial data. NSE, 27 years, annual rebalance, equal weight, value universe (bottom P/B quintile). Next-day close (MOC) execution. Data quality guards: phantom holiday rows removed, individual stock returns filtered for adjClose artifacts. Past performance does not guarantee future results. Educational content only, not investment advice.
