High Piotroski Scores Meet Low P/E in Indian Large Caps

The screen that shouldn't exist A quality screen just coughed up eight of India's most liquid large caps. High Piotroski scores meet low P/E in Indian large caps. Their F-Scores sit at 8 out of 9. Their P/E ratios run from 10.39 to 19.16. That combination should not happen often in a market that pays up for earnings visibility. The names are HDFC Bank (NSE: HDFCBANK), SBI (NSE: SBIN), TCS (NSE: TCS), Infosys (NSE: INFY), Kotak Mahindra Bank (NSE: KOTAKBANK), Axis Bank (NSE: AXISBANK), ITC (NSE: ITC) and NTPC (NSE: NTPC). TCS and ITC add another wrinkle: return on equity above 47%. A Piotroski F-Score of 8 says balance sheets are improving. Liquidity is adequate. Profitability is stable. Yet the market prices several of these stocks as if the earnings cycle has already peaked. Here is the uncomfortable question: if fundamentals are this strong, why are valuations this polite? Either the market is wrong, or the F-Score is blind to something. Both can be true. What the F-Score actually flags in banks Banks dominate the list. Four of the eight names are lenders. That is not an accident. Indian banks spent three years repairing balance sheets after the corporate bad loan cycle. The F-Score picks up rising return on assets. Improving operating cash flow. Lower leverage. For [HDFC Bank](/stock/HDFCBANK) and [Axis Bank](/stock/AXISBANK), the score reflects deposit franchise strength and normalizing credit costs. For [SBI](/stock/SBIN), the low P/E near 10.39 times is the real draw. The market is pricing in almost no net profit growth from India's largest lender. TCS and Infosys are the odd pair. They trade on higher multiples because software earnings are more predictable. Yet even their P/E ratios sit below their five-year averages. TCS's 47% ROE is real. Negative working capital and a cash-heavy balance sheet do that. ITC's 47% ROE is different. Years of buybacks have shrunk equity, so the ratio flatters a conglomerate that still depends on cigarettes for a large sh...