This is a slightly more tricky game and in many cases it is hard to define. You get to hear this discussion on value versus growth quite often. This argument has more to do with P/E ratios. Normally, value stocks are quality stocks that are available at attractive P/E ratios in absolute terms. Some industry benchmarks are set and decisions are taken. For example, if IT is available at 12 times P/E or steel is available at 5 times P/E, then they are classified as value plays. Value stocks can also be understood in terms of their dividend yields. For example, stocks like NMDC are giving dividend yields of 9-10% currently, making them value buys.

Growth approach, on the other hand, focuses on the ability of the company to grow. Here P/E is not too relevant as long as the rapid growth can justify the same. No P/E benchmarks are considered here. For example, if a stock like Motherson Sumi can growth at 30% for the next 5 years then it can be purchased even at 35 times P/E, irrespective of the auto ancillary sector’s average P/E. Typically a value approach works more in case of large cap companies, while a growth approach works better in case of mid-cap companies.