Performance of Quality-Based Long–Short Portfolios in the Indian Equity Market

Abstract; This paper analyzes the performance of quality-based long–short equity portfolios in the Indian stock market over a long-term sample period. Using firm-level accounting and return data for listed Indian companies, the study constructs portfolios based on multiple quality-related indicators covering profitability, accounting quality, capital structure, earnings stability, and human capital efficiency. Firms are sorted annually into deciles based on each quality proxy, and long–short portfolios are formed by taking long positions in high-quality firms and short positions in low-quality firms. Portfolio performance is evaluated using annualized returns, volatility, and risk-adjusted measures. The results suggest that profitability- and earnings stability–based quality measures generally exhibit positive long–short performance, while accounting quality and leverage-based measures show mixed or weaker results. Human capital–based indicators display varying performance depending on the proxy employed. Overall, the findings provide descriptive evidence on the behavior of quality-oriented investment strategies in the Indian equity market. The study is intended as an applied empirical analysis and offers practical insights for researchers and market participants interested in quality-based portfolio strategies.