Nifty 50 PE Ratio: PE Ratio of Nifty 50 Stocks to Buy in NSE India

Last Updated on Nov 12, 2024 by Aishika Banerjee

The Nifty PE ratio represents the valuation metric for the Nifty 50 index, comprising 50 major companies publicly traded on India’s National Stock Exchange. For investors, PE ratio is an integral part of the analysis to understand the market value of a stock as compared to the company’s earnings. In this article, let’s look at a list of Nifty 50 stocks sorted according to their PE ratio, understand the PE ratio in-depth, explain why you should consider PE ratio of Nifty 50 before investing, and more.

What is Nifty 50?

The Nifty 50 is one of the leading stock market indices in India, representing the weighted average of the top 50 companies listed on the National Stock Exchange (NSE). It is considered a benchmark index for the Indian stock market, reflecting the overall market trends and economic health. When people talk about the Nifty index, they are usually referring to the Nifty 50.

Investors often track the Nifty 50 graph to understand market movements, as it is widely seen as an indicator of market trends. The index’s performance is closely watched by investors, analysts, and fund managers for investment decisions. The Nifty 50’s historical performance, including its all-time highs and lows, is often used to gauge market sentiment and predict future trends.

What is PE in Share Market?

PE, or Price-to-Earnings ratio, is a commonly used financial metric in the share market that helps investors evaluate the valuation of a company’s stock. It indicates how much investors are willing to pay for each rupee of earnings generated by a company. The PE ratio is calculated by dividing the current market price of a stock by its Earnings Per Share (EPS).

List of Nifty 50 Stocks with PE Ratio

Here is a list of Nifty 50 stocks sorted according to their PE ratio.

Note: The data of Nifty 50 PE ratio is from 11th September 2024, and is taken from Tickertape Stock Screener. To get the list of Nifty PE ratio today, apply the below-listed filters are applied –

• Sector universe – Nifty 50
• PE ratio – Sorted from highest to lowest

🚀 Pro Tip: You can use Tickertape’s Stock Screener to research and evaluate stocks with over 200+ filters and parameters.

Confused about which Nifty stocks to pick? You can consider these smallcases as an alternative

Let’s learn about what is a smallcase first. 

smallcases are modern investment products that help investors easily build a low-cost, long-term and diversified portfolio. A smallcase is a basket of stocks/ETFs that collectively represent a theme, idea or strategy. Investors looking to align their investments sector-wise can consider smallcases. Every smallcase is created and managed by SEBI-registered managers.

Investors interred in Nifty stocks can consider the Smart Index Advantage smallcase, managed by Green Portfolio. This smallcase invests in the top 10-12 Nifty stocks. 

Smart Index Advantage smallcase by Green Portfolio

Investors can also consider the NIFTY PROBABLES smallcase managed by PVR Advisory. This smallcase is collection of stocks has the potential to enter into Nifty 50 index in the next 5-10 years. 

NIFTY PROBABLES smallcase by PVR Advisory

• Disclosures for the Smart Index Advantage smallcase. 
• Disclosures for the NIFTY PROBABLES smallcase. 

Note: These smallcases are mentioned only for educational purposes and are not meant to be recommendatory. Investors must conduct their own research and consult a financial expert before making any investment decisions.

Top Nifty 50 Stocks Based on 1Y Return

Note: The data of Nifty 50 PE ratio is from 1st May 2024, and is taken from Tickertape Stock Screener. To get the list of Nifty PE ratio today, apply the below-listed filters are applied –

• Sector universe – Nifty 50
• 1Y Returns – Sorted from highest to lowest

PE ratio of Nifty indexes

Note: The Nifty PE ratio of different Nifty indexes is derived from Tickertape. The data is from 11th September 2024.

Understanding the PE in Stock Market

As we already know, the ‘PE’ full form in share market refers to the “Price-to-Earnings Ratio”, let us take a deeper look at it.

The PE ratio is one of the most widely used metrics by investors and analysts to evaluate the relative value of a company’s stock. It helps you understand how much you are paying for each unit of earnings generated by the company. For instance, if a stock has a PE ratio of 20, it means investors are willing to pay 20 rupees for every 1 rupee of the company’s earnings. 

A high PE ratio signifies that the stock is expensive, whereas a low PE ratio indicates that the stock is undervalued compared to earnings and might rise in price. A ratio between 20 and 25 is considered average, and anything below is considered a good PE ratio.

The PE ratio can be categorised into two types:

1. Trailing PE Ratio: This is based on the actual earnings of a company over the past 12 months. It provides a historical view and is used to assess how the stock has performed relative to its earnings.
2. Forward PE Ratio: This is based on estimated earnings for the next 12 months, helping investors anticipate how the company might perform in the future. It is particularly useful in assessing companies in high-growth sectors where earnings are expected to rise rapidly.

A deeper analysis of the PE ratio can give you insights into the stock’s market perception, the company’s growth prospects, and even investor sentiment. It is important to understand that the PE ratio should not be viewed in isolation. Instead, it should be compared with industry averages, historical PE ratios, and the PE ratios of similar companies to get a clearer picture.

The Role of PE Ratio in Different Market Scenarios

The PE ratio’s interpretation can vary depending on market conditions. During a bull market, when stock prices are generally rising, PE ratios tend to be higher as investors are more optimistic about future growth prospects. On the other hand, during bear markets, PE ratios can decline as investors become cautious and stock prices fall. This makes the PE ratio a dynamic tool that reflects not only the company’s financial performance but also the broader market sentiments.

For indices like the Nifty 50, the PE ratio helps investors understand the valuation of the overall market. A high Nifty PE ratio might suggest that stocks in the index are overvalued, while a low ratio could indicate undervaluation, presenting potential buying opportunities. By observing the Nifty 50 PE ratio chart over time, you can track how market valuations change in response to economic events, earnings announcements, and other market-moving factors.

PE Ratio in Sectoral Analysis

The PE ratio also plays a significant role in sectoral analysis. For example, the PE ratios of Nifty IT stocks might differ significantly from those of Nifty large cap 100 or Nifty small cap 100 due to the varying growth prospects and risk profiles of these sectors. Investors looking for low PE ratio stocks often focus on sectors or companies that are undervalued, possibly due to temporary setbacks, but have strong fundamentals that might support a future recovery.

Comparison of the current PE ratio of the Nifty 50 with its historical averages can help you gauge whether the index is at its peak, such as during a market rally leading to an all-time high, or if it is trading at a lower valuation, potentially indicating an investment opportunity. For instance, when the Nifty PE today is significantly higher than the long-term average, it might signal that the market is expensive and is due for a correction. Conversely, when the Nifty current PE is below historical norms, it could suggest that the market is undervalued.

A clear understanding of the implications of the PE ratio and regular monitoring can provide insights needed to make informed investment decisions, especially when navigating through the dynamic landscape of the stock market.

How is the Nifty PE ratio calculated?

The Nifty PE ratio is calculated by dividing the total market capitalisation of the Nifty 50 companies by their total earnings. Here’s a step-by-step process:

1. Determine the Market Capitalisation: The first step is to calculate the market capitalisation of all the companies included in the Nifty 50 index. Market capitalisation is the total market value of a company’s outstanding shares, which is calculated by multiplying the current stock price by the total number of shares.
2. Calculate Total Earnings: The next step is to determine the aggregate earnings of all the Nifty 50 companies. This is usually derived from the companies’ net profits over the last four quarters.
3. Divide Market Capitalisation by Total Earnings: Finally, the Nifty PE ratio is calculated by dividing the combined market capitalisation of all Nifty 50 companies by their total earnings.

Nifty PE Ratio = Total Market Capitalisation of Nifty 50 Companies​ / Total Earnings of Nifty 50 Companies 

This ratio provides an insight into how much investors are willing to pay for each unit of earnings in the Nifty 50. It is important to note that the Nifty 50 PE ratio fluctuates based on market conditions, changes in stock prices, and earnings reports from the companies within the index.

The Nifty 50 PE ratio helps investors gauge the market’s overall valuation and make more informed investment decisions. A comparison of the current Nifty PE ratio with historical averages can provide perspective on whether the market appears overvalued, undervalued, or fairly valued.

Why an Investor Should Look at the Nifty PE Ratio Before Investing?

Investors should look at the Nifty PE ratio before investing because it provides insights into whether the market is overvalued or undervalued. The PE ratio, or price earnings ratio, helps compare the current valuation of the Nifty 50 with its historical performance, including past Nifty all-time high values. Analyzing the Nifty50 PE ratio today can help you decide if the stock price of Nifty 50 companies is justified compared to past trends and market conditions. Comparing the Nifty 50 PE ratio with other indices like the NSE 50 index or industry PE ratio can also highlight whether large-cap stocks are offering value.

A high PE ratio in the NSE Nifty 50 might suggest that stocks are overpriced, indicating potential risk, while a low PE ratio could signal opportunities in low PE stocks. For Nifty 50 investing, it’s crucial to perform a Nifty PE check to gauge market sentiment and investor expectations. Reviewing the Nifty graph and other valuation metrics like the PB ratio helps in understanding broader market dynamics. Overall, considering the Nifty 50 PE ratio before investing can guide you in finding the best PE ratio stocks within the Nifty indices list.

What is an Ideal PE Ratio?

An ideal PE ratio varies based on the industry, market conditions, and investor expectations. For mature sectors like utilities or manufacturing, a PE ratio between 15-20 is generally considered reasonable. However, for high-growth sectors such as technology, higher PE ratios are often acceptable due to anticipated earnings growth. In the context of the Nifty 50, an ideal PE ratio can be identified by comparing the current Nifty 50 PE ratio today with its historical averages and the PE ratios of other indices like the Nifty Next 50.

When the Nifty 50 PE ratio rises above its historical average, it may suggest overvaluation of the Nifty market, indicating that investors are paying a premium for the stocks. Conversely, a lower PE ratio could mean that the Nifty 50 share market is undervalued, presenting potential opportunities for those looking for low PE stocks. While no single number defines an ideal PE ratio, it’s important to consider it alongside other valuation metrics such as the PB ratio, which measures the stock price relative to the company’s book value. This helps in gaining a holistic view of the Nifty 50 companies and their current valuations.

Five Things to Know About the Nifty PE Ratio Chart

The Nifty PE ratio chart is an essential tool for investors in the Indian stock market, helping them understand valuations over time. Here are five key things to know:

1. PE Can Alter Based on Sector Composition: The composition of the Nifty 50 index significantly influences its PE ratio. For instance, if sectors like IT or finance gain more weight in the Nifty 50 companies list 2024, the overall PE ratio might be higher. This shift in sector composition impacts how investors perceive the Nifty price and market value.
2. The Denominator Can Result in Conflicting Signals: Earnings, the denominator in the PE ratio, can fluctuate due to factors such as economic downturns, profit declines, or corporate losses. This can cause sudden spikes or drops in the Nifty 50 PE ratio, potentially misleading investors about the actual valuation of the Nifty 50 index.
3. Indicator of Market Sentiment: The Nifty PE ratio today often reflects market sentiment. A high PE ratio might indicate investor optimism, possibly pushing the Nifty all-time high price, whereas a lower PE ratio could signal caution or undervaluation within the Nifty 50 share market.
4. Useful for Comparing Indices: Comparing the Nifty 50 PE ratio with other indices like the Nifty Next 50 or the Nifty Fifty index provides insights into which segments of the NSE index are overvalued or undervalued. Such comparisons can guide you in choosing between large-cap and mid-cap stocks based on valuation metrics.
5. Historical Trends and Market Cycles: The Nifty PE ratio chart provides valuable insights into historical trends, helping you track market cycles, including peaks and troughs. By studying these trends, you can better understand when the Nifty 50 reached an all-time high or hit a low, aligning your investment strategies with market conditions.

Conclusion

For investors, the PE ratio is an essential fundamental analysis tool to ascertain a stock’s valuation, growth potential, risk, and market sentiment. Investors can make informed decisions by considering the PE ratio and other analytical ideologies. With the help of Tickertape Stock Screener, you can identify PE of Nifty 50 and apply over 200 filters to carry out your fundamental analysis. Explore today!

Frequently Asked Questions on PE Ratio of Nifty 50 Stocks

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Harshit Singh

Content Strategist at Tickertape

Hey there, I’m Harshit Singh Mahey! With eight years of experience as a Content Strategist, I’ve had the pleasure of working with a Fortune 100 company and building three successful startups from the ground up.

As an investment fanatic, I’ve dabbled in early-stage startups, mutual funds, gold, stocks, smallcases, and real estate to identify which assets generate the highest ROI. At Tickertape, I’m dedicated to presenting my learning and providing insightful suggestions to help my readers make sound investment decision.

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