Nifty PE Ratio

Understanding the Nifty PE Ratio: A Complete Guide

The Nifty PE ratio (Price-to-Earnings ratio) is the most widely used valuation metric for the Indian stock market. It tells you how much investors are currently paying for every ₹1 of earnings generated by the 50 largest companies listed on the National Stock Exchange of India. A Nifty PE of 22.60, for example, means investors are paying ₹22.60 for every ₹1 of combined earnings of all Nifty 50 companies.

The Nifty 50 PE ratio formula is straightforward: PE Ratio = Index Market Capitalisation ÷ Gross Earnings of all 50 constituent companies. NSE calculates this using the trailing four quarters of earnings (TTM basis). Since April 2021, NSE switched from standalone earnings to consolidated earnings for this calculation, which is an important distinction when comparing current PE levels with pre-2021 historical data.

How to Use the Nifty PE Ratio for Investment Decisions

Historical data since 1999 shows clear patterns in the Nifty PE ratio that investors can use to make better decisions. Here are the valuation zones based on over 25 years of data:

Nifty PE Range	Market Valuation	What Investors Typically Do
Below -1SD	Undervalued (Buying Zone)	Aggressive buying — historically the best long-term entry points
Between -1SD & Median	Fairly Valued	Continue SIPs and regular investing with normal allocation
Between Median & 1SD	Slightly Overvalued	Be cautious — continue SIPs but avoid lump sum investments
Above 1SD	Overvalued (Caution Zone)	Consider booking partial profits and increasing debt allocation

Before the 2008 crash, the Nifty PE ratio peaked at 28.29. During the COVID-19 crash in March 2020, it dropped to around 17 before bouncing sharply. And during the COVID stimulus rally, it spiked to over 40 on a standalone basis (around 32 on consolidated basis). These extremes show why tracking the Nifty PE historically — not just the current number — matters so much.

Why We Track PE, PB, and Dividend Yield Together

The PE ratio alone doesn't give you the full picture. That's why at nifty-pe-ratio.com, we display three key valuation metrics side by side:

PE Ratio (Price-to-Earnings) measures how expensive the market is relative to its current earnings. It's the primary valuation gauge, but it can be distorted by temporary earnings spikes or drops.

PB Ratio (Price-to-Book) compares market price to book value (net assets). A Nifty PB below 2.5 historically signals undervaluation, while above 4.5 signals overvaluation. As of 18-Feb-2026, the Nifty PB ratio stands at 3.51.

Dividend Yield measures the income return from dividends. A yield above 1.5% historically coincides with undervalued markets (good buying opportunities), while a yield below 1% often signals overvaluation. As of 18-Feb-2026, the Nifty dividend yield of 1.21% sits in the neutral-to-cautious zone.

When all three metrics point in the same direction — for example, high PE + high PB + low dividend yield — investors can have higher conviction about the market's valuation status.

Standalone vs Consolidated Nifty PE: An Important Distinction

In April 2021, NSE made a significant change: they switched from using standalone earnings to consolidated earnings for calculating the Nifty 50 PE ratio. This caused the published PE to drop overnight from approximately 40 to 32 — not because the market got cheaper, but because consolidated earnings (which include subsidiary profits) are higher than standalone earnings.

This means that comparing today's Nifty PE with pre-April 2021 data requires caution. A PE of 22.60 today (on consolidated basis) is not directly comparable to a PE of 22.60 in, say, 2018 (which was on standalone basis). Our charts at nifty-pe-ratio.com account for this transition, giving you an accurate historical perspective that you can read more about in our complete Nifty PE Ratio guide.

Sectoral PE Ratio Comparison

Different sectors of the Nifty trade at very different PE multiples. IT and FMCG sectors typically command PE ratios of 25-35 due to their predictable earnings and high return on equity. Banking and Financial Services tend to trade at PE ratios of 12-20. Cyclical sectors like Metals, Energy, and Realty can swing from single-digit PEs to 30+ depending on the commodity cycle.

At nifty-pe-ratio.com, we track PE ratios for 15+ Nifty sectoral and broad market indices including Bank Nifty, Nifty IT, Nifty Pharma, Nifty FMCG, Nifty Metal, Nifty Midcap 50, Nifty Midcap 150, Nifty Smallcap 250, Nifty Next 50, Nifty 500, and more. This allows investors to identify which sectors are currently undervalued relative to their own historical averages — a powerful tool for sectoral rotation strategies.

Frequently Asked Questions

Disclaimer: The information provided on nifty-pe-ratio.com is for educational and informational purposes only and should not be considered as investment advice. Past performance is not indicative of future results. Always do your own research and consult a qualified financial advisor before making investment decisions. Data sourced from NSE India.