When a beloved idea underperforms, the honest next step is to look for the version that would have worked: a tighter cut, a different market, a cheaper entry. We looked hard. For this decade in India, there was not much to find, and that itself is the lesson.
If a screen barely sorts, no way of holding it can rescue it, because there is no reliable best to concentrate into. That is exactly what we found. Every version of the quality screen, broad or tight, clustered around the same disappointing number.
We ran it four ways, from the broad quality decile down to the ten highest scoring compounders. They all returned about 11% a year, below the market, with barely a hair between them. When conviction and breadth produce the same mediocre result, it is a sign the ranking holds no information, and leaning harder on the "best" names buys you nothing. The quality score simply was not separating winners from losers this decade.
Perhaps quality just needed the right conditions. It did not get them, and would not have thrived even so. When growth was expanding the screen was merely average; when growth slowed, the supposed safe harbour of quality actually turned negative. The businesses sold as all weather compounders did not shelter you in the downturn. Across every macro state, this decade found something it liked better than quality, usually something cheap.
Two last checks make the risk concrete: what the basket was actually made of, by company size, and, instead of the single drawdown path, the worst fall you would have suffered no matter which month you started and held for five years.
None of this retires the idea. A century of global evidence says great businesses compound, and this is one decade in one country where the market spent the whole time paying up for growth and safety and then handing the returns to the cheap and unloved instead. Quality wins when its premium is small, when wonderful companies can be bought near fair value. This decade, in India, they never could. If you believe that reverses, the way to hold quality is patiently and cheaply, and the way to know whether it has reversed is to keep checking, not to keep the faith. The creed is not wrong. It was simply, here, early.
Demand a deeper discount before you buy quality, pair it with momentum, tilt it smaller or larger, and watch whether any of it clears the market. The screen that disappointed as built may yet have a form that pays. The only way to find out is to try, on the real history.
So we took it to Krest, and ran it through the whole test.
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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 a quality compounders screen (ranked by return on invested capital and earnings yield, ROIC above 15%, positive EBIT, debt to equity below 1, market cap above ₹1,000 cr), reconstructed yearly over the last ten years of Indian data (since June 2016), measured against the Nifty 500 total return index. Concentration and regime figures computed across all rolling windows.
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