Death of value investing?

Summary: When value runs too hot, the cool-off is never far behind. We unpack the data behind the reversal, the ratio that has predicted past downturns and how active managers handle these shifts. For the past five years, value investing has been the toast of Indian markets. Portfolios teeming with PSUs (public sector undertakings), infrastructure and consumer stocks have looked brilliant. Even passive investors in the Nifty 500 Value 50 index enjoyed enviable gains. But every party has a closing act, and the music for value investing is beginning to fade. The data tells the story better than opinion ever could. In mid-2024, the one-year return of the Nifty 500 Value 50 index was over 60 per cent more than BSE 500 (a stand-in for the Indian equity market). That’s an extraordinary gap that made value investors look invincible. But today, that lead has evaporated. It’s now trailing by about 2 per cent. The reversal, visible only in 2025, is a reminder that even the strongest trends can turn before anyone notices. That said, we are not here to write an obituary. It’s just a reminder that every investing style, no matter how sound, eventually reaches a boiling point. Nothing lasts forever Each market phase has its favourite child. When investors crave certainty, growth stocks with expanding earnings take the lead. When they tire of perfection, the crowd swings to value, drawn to cheap pr