How to create a personalised stock‑screening checklist?
- 27th December 2025
- 10 min read
This article covers the essential steps to build a personalised stock-screening checklist tailored for the Indian market in FY 2025-26. We analyze key financial metrics like ROE and Debt-to-Equity in the context of the current 5.25% Repo Rate environment. The guide explains how to filter stocks using Nifty 50 valuations (PE ~22.5), identify red flags like ASM/GSM listings, and adjust for sector-specific nuances. You will find a step-by-step framework to transition from a novice stock picker to a disciplined investor using a data-driven approach.
The Indian stock market often feels like a chaotic supermarket. With over 5,000 listed companies on the BSE and NSE, finding the right investment is less about “picking winners” and more about filtering out the noise. Without a structured approach, you risk buying into hype—like the “finfluencer” tips that SEBI is actively cracking down on as of December 2025. A personalised stock-screening checklist acts as your quality control filter. It ensures that every stock you buy meets your specific standards for financial health, valuation, and growth potential before it ever enters your portfolio.
The Foundation: Defining Your Investment Personality
Before you look at a single P/E ratio, you must define the lens through which you view the market. A checklist that works for a retired banker seeking dividends will fail a 28-year-old software engineer chasing growth. Your checklist must align with your financial goals and risk appetite.
1. The Conservative Income Seeker
If your goal is capital preservation and regular income, your checklist prioritizes stability. You look for established market leaders (Large Caps) with a history of paying dividends. In the current market, where the Nifty 50 dividend yield hovers around 1.3%, your filter might demand a yield of at least 2-3%.
2. The Aggressive Growth Hunter
If you are building wealth for a goal 15 years away, you can afford volatility. Your checklist focuses on earnings growth. You might target Small and Mid-cap companies (SEBI defines these as companies ranked 101st and beyond by market capitalization) that are reinvesting profits rather than paying dividends. You accept a higher P/E ratio today for the promise of exponential growth tomorrow.
3. The Value Investor
You hunt for bargains. Your checklist looks for stocks trading below their intrinsic value—perhaps a solid company temporarily beaten down by bad news. You focus heavily on valuation metrics like Price-to-Book (P/B) and low P/E relative to industry peers.
Essential Financial Metrics: The Quantitative Filter
Once you know your style, you need hard numbers to filter the list. These metrics form the core of any robust stock screener. As of December 2025, here are the benchmarks you should consider.
Return on Equity (ROE) and ROCE
ROE measures how efficiently a company uses shareholder capital. A classic benchmark in India is an ROE greater than 15%. This suggests the company generates ₹15 profit for every ₹100 of shareholder equity. For capital-intensive sectors like manufacturing, Return on Capital Employed (ROCE) is a better measure as it accounts for debt.
- Checklist Item: ROE > 15% (avg over 3 years).
- Why it matters: It proves management’s ability to generate value without excessive dilution.
Debt-to-Equity Ratio
With the RBI’s Repo Rate at 5.25% (as of December 5, 2025), the cost of borrowing has moderated but remains a critical factor. High debt eats into profits through interest payments. A Debt-to-Equity ratio of less than 1.0 is generally safe. However, for capital-heavy sectors like infrastructure or power, up to 1.5 might be acceptable if cash flows are stable.
- Checklist Item: Debt-to-Equity < 1.0 (Strict for small caps).
- Why it matters: Debt can kill a company during economic downturns. In FY 2025-26, companies with low debt are better positioned to navigate global uncertainties.
Profit Growth vs. Sales Growth
Sales growth shows demand; profit growth shows efficiency. Ideally, you want both. If sales are growing at 10% but profits are flat, margins are shrinking. Conversely, if profits are growing but sales are flat, the growth is likely from cost-cutting, which isn’t sustainable forever.
- Checklist Item: 5-Year Sales and Profit CAGR > 10%.
- Why it matters: Consistent double-digit growth is the hallmark of a “compounder” stock.
Valuation Checks: Paying the Right Price
A great company can be a terrible investment if you overpay. Valuation is the art of determining what a stock is worth versus what it costs.
The P/E Ratio Context
As of December 9, 2025, the Nifty 50 P/E ratio is approximately 22.5. This serves as a market benchmark. If a stock trades at a P/E of 50, it must be growing significantly faster than the market to justify the premium.
- Checklist Item: P/E < Industry Average OR PEG Ratio < 1.5.
- Pro Tip: The Price/Earnings-to-Growth (PEG) ratio is powerful. A PEG under 1.0 suggests the stock is undervalued relative to its growth rate. A PEG over 2.0 often signals overvaluation.
Promoter Pledging
This is a specific red flag in the Indian market. Promoters sometimes pledge their shares as collateral to take loans. If the stock price falls, lenders may sell these shares, triggering a crash.
- Checklist Item: Promoter Pledging < 5% (Ideally 0%).
- Why it matters: High pledging indicates personal financial stress of the promoters, which often spills over into the company.
Qualitative Checks: Beyond the Numbers
Screens can give you a list of 50 stocks, but they can’t tell you about corporate governance. This is where manual checking is non-negotiable.
Management Integrity
Read the annual report. Does the management walk the talk? Look for “Related Party Transactions”—does the company lend money to the promoter’s other private businesses? This is a major warning sign.
Auditor Resignations
If an auditor resigns abruptly, especially citing “lack of information,” run. This often precedes the discovery of financial fraud. Check news archives for any such announcements in the last 2-3 years.
Regulatory Surveillance (ASM/GSM)
SEBI and exchanges maintain lists like Additional Surveillance Measure (ASM) and Graded Surveillance Measure (GSM) to monitor stocks with abnormal price movements.
- Checklist Item: Is the stock in GSM Stage 2, 3, or 4?
- Why it matters: Stocks in these categories often have trading restrictions (e.g., trade-for-trade only, weekly trading). For example, as of December 2025, several small-cap stocks are in GSM Stage 3, allowing trading only once a week (Mondays). Avoid these unless you deeply understand the risk.
Sector-Specific Screening Nuances
A generic checklist fails when comparing a Bank to an IT company. You need sector-specific filters.
Banking and Finance (BFSI)
P/E is less relevant here. Use Price-to-Book (P/B) instead.
- Critical Metric: Gross NPA (Non-Performing Assets). As per the RBI Financial Stability Report (Dec 2024), the GNPA ratio of Scheduled Commercial Banks fell to a multi-year low of ~2.6%.
- Checklist Item: GNPA < 3% and Net Interest Margin (NIM) > 3%.
Information Technology (IT)
IT companies are asset-light, so Debt-to-Equity is usually zero.
- Critical Metric: Attrition Rate and Deal Wins (Total Contract Value – TCV).
- Checklist Item: Attrition trending down vs. previous quarter; steady TCV growth.
Manufacturing / Infrastructure
These are capital-intensive.
- Critical Metric: Interest Coverage Ratio (EBIT / Interest Expense).
- Checklist Item: Interest Coverage Ratio > 3.0. This ensures they earn enough to pay interest three times over.
Building Your Personalised Checklist: A Step-by-Step Framework
Here is how to consolidate these metrics into a usable tool. You can use this structure to create your own filter on any screening platform.
| Category | Metric | Conservative Criteria | Aggressive Criteria | Why It Matters |
|---|---|---|---|---|
| Valuation | P/E Ratio | Less than 20 (or < Index PE) | Less than 40 (if PEG < 1.5) | Prevents overpaying for hype. |
| Efficiency | ROE | > 15% | > 20% | Measures profit generation power. |
| Safety | Debt-to-Equity | < 0.5 | < 1.0 | Protects against rate hike cycles. |
| Growth | Sales Growth (3Yr) | > 8% | > 15% | Ensures business is expanding. |
| Cash Flow | CFO vs EBITDA | Positive & consistent | Positive | Profit must be real cash, not accounting entries. |
| Governance | Promoter Pledging | 0% | < 5% | Avoids promoter insolvency risk. |
| Liquidity | Avg Daily Volume | High (> 1 Lakh shares) | Medium (> 20k shares) | Ensures you can exit when needed. |
Data Source: Standard financial ratios adapted for Indian market context FY 2025-26.
Important Notes on Taxes (FY 2025-26)
When screening for potential returns, remember to factor in taxes. As per the Finance Act 2024 (effective July 23, 2024), Long-Term Capital Gains (LTCG) on stocks held for more than 12 months are taxed at 12.5% on gains exceeding ₹1.25 lakh. Short-Term Capital Gains (STCG) are taxed at 20%. Your screening return expectations should be net of these taxes.
Conclusion
Creating a personalised stock-screening checklist is the difference between gambling and investing. It removes emotion from the equation and forces you to focus on facts. Whether you are filtering for the stability of a large bank or the agility of a niche IT player, your checklist ensures you only buy quality. Remember, the goal isn’t to find every winner, but to avoid the disastrous losers.
Ready to apply your new checklist? Open your PL Capital account today and access institutional-grade research and screening tools to build your wealth with confidence.
FAQs on Stock Screening Checklist
1. What is the ideal P/E ratio for Indian stocks in 2025?
There is no single “ideal” number, but the Nifty 50 P/E of approximately 22.5 (as of December 2025) serves as a benchmark. Value stocks often trade below 20, while high-growth companies can command P/Es of 40-50. Always compare a stock’s P/E to its industry average and its own historical median.
2. How does the ASM/GSM list affect stock screening?
Stocks placed in the Additional Surveillance Measure (ASM) or Graded Surveillance Measure (GSM) lists by SEBI/Exchanges have higher risk monitoring. For example, GSM Stage 3 stocks can only be traded once a week (Mondays). A robust checklist should generally exclude these stocks to avoid liquidity risks and regulatory restrictions.
3. Can I use this checklist for penny stocks?
It is risky. Penny stocks often fail standard metric tests like consistent ROE or institutional holding. For small companies, prioritize “Cash Flow from Operations” and “Promoter Integrity” over simple P/E ratios. Also, verify they are not in the GSM list, which is common for penny stocks.
4. How do tax rates in FY 2025-26 impact my returns?
You must account for taxes to understand real returns. As of December 2025, Short-Term Capital Gains (STCG) are taxed at 20%, and Long-Term Capital Gains (LTCG) above ₹1.25 lakh are taxed at 12.5%. Your screening criteria for “Target Return” should be higher to cover these tax outflows.
5. Why is Promoter Pledging a red flag in India?
Promoter pledging implies the owners have taken personal loans using their shares as collateral. If the stock price falls, lenders may sell these pledged shares, causing a further price crash. A safe checklist typically filters out companies where pledging exceeds 5-10% of the promoter’s holding.
