The overview showed a quality screen that trailed a plain index fund on every horizon. This is why. A score that ranks companies has to actually sort the good from the bad. This one, on a decade of Indian data, mostly does not, and once you see that, the underperformance stops being a surprise.
The whole promise of the Piotroski score is a ranking: add up nine signs of financial health, and the companies that score highest should, over time, do better than the ones that score low. That is the entire idea. So we ran the test that matters. We sorted every stock into ten buckets by its score, from the highest to the lowest, and asked whether the better scoring buckets actually earned more.
If the score worked, returns would step down cleanly from the highest bucket to the lowest. They do the opposite of cleanly. The middle of the pack led. The very highest scoring bucket, the stocks the checklist rates best, landed near the bottom, below several buckets it looks down on, and even below the plain index. Across the decade the ordering carried almost no information.
Put a number on it and the rank correlation between the score and the decade's returns is about −0.15, a hair the wrong side of zero when a genuinely useful score would sit near −1. Four of the nine bucket to bucket steps went the wrong way. The ranking that the whole screen depends on is, statistically, barely there.
Perhaps the score works in some stretches and not others. It does swing, but never usefully: its sorting power lurches from one starting point to the next and averages out near nothing. Below is the rank correlation for every one year window across the decade. A genuine sort shows up as a negative number, heading toward −1; near zero, or positive, means no real sort. Green marks the windows it sorted correctly, red the windows it sorted backwards.
If the score sorted stocks, leaning into its top names would pay. It did not. Every way of holding the score itself, the broad top decile, the highest thirty, the highest ten, clung near thirteen percent a year and under the index. The one version that actually cleared the market was the one that overrode the score, capping how much any sector or size could dominate. Which rather makes the point: the fix was to constrain the checklist, not to follow it.
Strip away the averages and ask the plain question: pick a random month, hold for a while, and how often did the score come out ahead of a plain index fund? About half the time, on every horizon and every cut. A coin flip, in return for studying nine financial ratios on every company you buy.
A score built entirely on company fundamentals should be fairly indifferent to the macro weather. This one was not. Split the decade by regime and almost all of its return arrived while the economy was expanding; when growth turned down, the "financially healthy" companies fell with everything else, and then some. Inflation and rates barely moved the needle. For a checklist about balance sheet strength, that is a strange fingerprint.
Ask which real, buyable fund this checklist most resembles and the answer is a small cap blend: month to month it tracked a basket of small cap and quality funds at a correlation of about 0.77. Against its closest index, the Nifty 500 Equal Weight, it added essentially nothing, an alpha of about −0.1% a year. Nine ratios of study, to arrive at something a plain small cap fund would have handed you.
Put it together and a quiet answer appears. The decade delivered the score a respectable absolute return, but not because the ranking picked winners, because it did not rank at all. It came from holding a broad basket of cheap, ordinary companies through a decade that mostly rewarded being invested, minus a brutal drawdown the score did nothing to soften. The nine point checklist earned its keep by sounding rigorous while a wide net did the work.
That is not a verdict against studying company quality. It is an argument for checking. A respected name and a tidy score told you one story; the data, opened up, told another. The only way to know which is true for any screen you believe is to run it against real history yourself.
Maybe the sort sharpens if you price it differently, drop the sectors that dominated it, weight the nine signals unequally, or cap concentration, the one tweak that actually beat the market here. Maybe it does not. That is not a question to argue about; it is one to settle. Every filter and weight is yours to move, and the whole teardown rebuilds on your answer.
So we took it to Krest, and ran it through the whole test.
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Don't take our word for any of it. Every figure in this teardown came from a few clicks on Krest, and each is a click from the full, live analysis. Reading and exploring is free.
For education only. Not investment advice or a recommendation to buy, sell, or hold any security, strategy, or product. Past performance does not guarantee future results, and all investing carries risk, including the possible loss of capital. Make your own decisions, and consider consulting a SEBI registered investment adviser.
Best effort analysis. Prepared on a best effort basis from historical data and may contain errors, omissions, or assumptions. Shared for information and discussion only, and should be independently verified before you rely on it. Krest accepts no liability for any decision made or loss incurred based on it.
Figures reflect the Piotroski score screen (nine point fundamental score, priced below book value, market cap above ₹500 cr), reconstructed yearly, over the last ten years of Indian data (since June 2016), measured against the Nifty 500 total return index. Decile, correlation and base rate figures computed across all rolling windows.
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