The one factor behind BSE-500's biggest winners (and losers)

What do the BSE-500’s most spectacular winners of the past three years have in common? The answer is clear: cheap valuations. The stocks that delivered outsized gains were those trading at bargain price-to-earnings (P/E) multiples, while the biggest disappointments were often the ones investors had bid up to stratospheric valuations.

Let’s look at the data – and see how this insight can guide smarter investing.

Low valuations powered the top gainers

Over three years, the top 15 performers in the BSE-500 shared one trait: modest P/E ratios at the start. These were not market favourites but overlooked businesses available at low earnings multiples.

Median P/E (top 15 winners): 14.8×
BSE-500 median P/E (3 years ago): 26.8×

In short, investors who bought quality businesses at sensible valuations enjoyed both earnings growth and market re-rating.

Sky-high valuations plagued the biggest losers

The worst performers were the opposite: once-popular stocks with excessive valuations.

Median P/E (top 15 losers): 95.5×

The contrast is stark. Many of these names were priced for perfection, sometimes hundreds of times earnings, before collapsing when expectations disappointed.

The broader pattern: valuation matters everywhere

This is not unique to India. Globally, “value” stocks (low valuation) have historically outperformed “growth” stocks (high valuation).

• Over the past century, U.S. value stocks beat growth stocks by ~4 per cent annually.
• In 2022, MSCI World Value outperformed MSCI World Growth by 26 percentage points—the widest gap since the dot-com crash.

The principle holds: the cheaper you buy, the better your long-term odds.

The solution: focus on valuation-driven growth

Investors often chase hot narratives. But the evidence shows that starting valuation is the real driver of long-term returns.

Value Research’s stock ratings confirm this: valuation consistently emerges as the top factor behind successful long-term investments.

Proof in action: the long-term growth portfolio

We’ve built this insight into practice with the Value Research Stock Advisor Long-Term Growth Portfolio. It’s a curated set of 11 high-conviction stocks selected for reasonable valuations, strong quality, and healthy growth.

The portfolio at a glance (without names):

Median P/E: 20.6× vs. BSE-500’s current ~25×

This portfolio represents the most valued from our research universe, quality names with growth potential, trading below the market’s valuation.

Taking action: tilt the odds in your favour

The evidence is overwhelming: valuation is the North Star of long-term investing.

If you want to invest with the same advantage that powered the last three years’ winners, explore our Long-Term Growth Portfolio in Value Research Stock Advisor. With disciplined selection, continuous monitoring, and regular updates, it’s designed to help you capture growth while avoiding costly overvaluation traps.

Explore Stock Advisor today