The performance of quality investing in the Indian market has been explored through various studies, providing insights into its effectiveness and comparison with other investment factors:

1. Quality Factor Performance: A study from the Indian Institute of Management Ahmedabad (IIMA) reported that the Quality Minus Junk (QMJ) factor yielded a four-factor alpha of 0.92% per month, significantly outperforming other widely recognized factors like size, value, and momentum. In a long-only framework, the Quality factor earned an alpha of 0.69% per month, indicating a significant level of outperformance as judged by established thresholds. (Jacob, J., Pradeep K.P., & Varma, J. (2022)).

2. Stock Selection Strategies: Another study explored stock selection strategies based on four fundamental quality indicators to assess if they can generate superior returns compared to the overall market in India. The study utilised a sample of stocks from the BSE 500 index, representing a broad base of highly liquid stocks from all major industries in the Indian economy. It found that two of the four quality strategies, specifically the Grantham Quality indicator and Gross Profitability, generated superior returns even after controlling for market returns and other common factors like size, value, and momentum. (Lalwani, V., & Chakraborty, M. (2018)).

These studies highlight the potential of quality investing in generating superior returns in the Indian market, showcasing the effectiveness of certain quality indicators and the significant outperformance of the quality factor over other market factors. The data underscores the relevance of quality investing as a viable strategy in the Indian equity market, aligning with global trends in quality investing performance.

However, the greatest contribution that the quality factor can make to the portfolio is the peace of mind that an investor gains knowing that the possibility of rude surprises is minimised. That, as a popular tagline says, is “priceless”.