How good are the top 10 stocks of NIFTY Quality Low-Volatility 30 Index?

Published: June 21, 2019 at 10:58 am

Last Updated on December 29, 2021 at 4:51 pm

When it comes to stock selection, two questions are always on the top of my head: (1) Is there a simple way to find out how good a business is? At least I must be able to identify stocks that I should not invest in. If I can do this in a visual manner from balance sheet data it would be awesome. (2) Is there a way I can identify a good business from price information alone?

The Earnings Power Box by Hewitt Heiserman Jr is the answer to the first question (in my opinion of course) and low volatility investing is the answer to the second. In this article, I present the Earnings Power Box graphs for the top 10 stocks of Nifty Quality Low Volatility 30 Index based on the free stock analysis spreadsheet to value stocks in multiple ways!

As readers may be aware, I am a fan of strategic indices, also known as smart beta indices, also known as factor-based indices.  Factor investing is when one or more criterion like alpha, quality, low volatility, value are used to build a basket of stocks. This could simply be an individual stock portfolio or an index on which a mutual fund or ETF is based on.

Momentum investing where stocks with a recent price increase is also a type of factor investing: Momentum Stock Investing in India: Does it work? At least in the large cap segment, there is a strong correlation between momentum and low volatility investing.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

What is NIFTY Quality Low-Volatility 30 Index?

This has 30 stocks from NIFTY 100 and NIFTY Midcap 50 indices. Stocks with low price volatility in the last 365 days and higher profitability (ROE), lower leverage (debt to equity) and stabler earnings (EPS growth) are part of the index.

These are the top stocks of this index as on May 31st, 2019

  1. HDFC Bank Ltd. 5.82
  2. Hindustan Unilever Ltd. 5.00
  3. ITC Ltd. 4.91
  4. Wipro Ltd. 4.66
  5. Infosys Ltd. 4.61
  6. Britannia Industries Ltd. 4.49
  7. Asian Paints Ltd. 4.47
  8. Tata Consultancy Services Ltd. 4.27
  9. Marico Ltd. 4.00
  10. Housing Development Finance Corporation 3.79

The stocks in red (50% of the top 10) are also part of the Nifty 100 Low Volatility 30 Index – 30 stocks from Nifty 100 with low price volatility in the last 365 days.  I could have just gone with the low volatility index for this study but figured another factor like quality is a bit more aesthetically appealing!

What is Hewitt Heiserman Jr.’s Earnings Power Box?

This is a plot of two metrics: the Defensive EPS (earnings per share) vs Enterprising EPS. The idea is to spot where a company falls in.

This is based on the Earnings Power Valuation Model (doc file) and it was developed into an Excel calculator by Rs. Srivatsan. His guest post is a good starting point to understand the idea: It’s Earnings That Count: Forget the next Infy; Can you identify the next Satyam?

Srivatsan has defined enterprising and defensive EPS as follows:

Enterprising EPS = (Enterprising Income)/(Shares Outstanding)

Defensive EPS =  (Defensive Income)/(Shares Outstanding)

Enterprising Income = Net Income – (15% x total capital)

15% here is the weighted average cost of capital (WACC) and is an expected return. You can modify this for each FY and for each stock in the free stock analysis spreadsheet

15% x total capital = enterprising interest.

Defensive Income = Free Cash Flow – change in working capital since last FY.

For more commentary, see Pros & Cons of Finding Stocks with Earnings Power for Long-Term Profits.

This method was earlier used by Lokesh to identify 50 stocks with solid earnings power: Ability to self-fund and create value

So once we plot the graph it is a simple matter to check in which quadrant the data points lie and how it has changed with each financial year. In the graphs below, the year refers to March 31st of the corresponding financial year.


Earnings Power Box for HDFC Bank

Hindustan Unilever

Earnings Power Box for HUL


Earnings Power Box for ITC


Earnings Power Box for Wipro


Earnings Power Box for Infosys

Britannia Industries

Earnings Power Box for Britannia

Asian Paints

Earnings Power Box for Asian Paints

Tata Consultancy Services

Earnings Power Box for TCS


Earnings Power Box for MARICO

Housing Development Finance Corporation

Earnings Power Box for HDFC


  • HDFC Bank: For conservative investors, generates cash but not above weighted average cost of capital
  • Hindustan Unilever: Great business with authentic earnings power
  • ITC: Great business with authentic earnings power
  • Wipro: Same as HDFC bank
  • Infosys: Same as HUL, ITC (almost)
  • Britannia Industries: As Infy
  • Asian Paints: Same as HUL. ITC 
  • Tata Consultancy Services: Same as HUL. ITC 
  • Marico: Has moved to a better spot in recent years
  • Housing Development Finance Corporation:  More aggressive than the rest but not a bad buy per se

I hope you would agree that factor investing and a simple price based investing is a wonderful way to spot good businesses without worrying balance sheet jargon. Naturally, it would not be fool-proof but is a simple way to buy stocks without breaking our heads.

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.
🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)