Corroborate Benjamin Graham’s Approach of Valuing Equity with Special Reference to Indian Capital Market

Abstract

In this research we reconnoiter the effectiveness of Benjamin Graham’s formula for the Indian market and calculated the returns on BSE100 stocks for a tenure of a decade. Benjamin Graham devised a technique to calculate intrinsic value of stocks. His approach emphasized on buying the stocks with market value less than intrinsic value and selling the stocks with market value less than the intrinsic value. This strategy helped him to invest in stocks with less risk. The technique was originally developed by Graham in 1962 and reviewed by him in 1974.  He offered a simple and effective formula to calculate the stock’s intrinsic value. Graham’s formula is used to measure an individual company’s intrinsic value.  In this paper we wanted to study the effectiveness of Benjamin Graham’s formula on BSE100 stocks, to find out if the value investing method works. This method also helps investor to swiftly and precisely categorize underrated companies and expensive companies. We have conducted research based on past 10 years’ data to validate our findings.