Best Low PE Ratio Stocks of Nifty 50

Last Updated on Aug 23, 2024 by Anjali Chourasiya

There are many valuation ratios in the stock market. Among them, the Price-to-Earnings (PE) ratio is one of the most widely used. This ratio helps investors assess the relative value of their company’s shares compared to others in the same sector. Investors are often attracted to low PE ratio stocks as they provide an opportunity to acquire shares at a more affordable price relative to the company’s earnings. In this article, let’s look at the best PE ratio stocks in the Nifty 50 universe based on multiple factors like Earnings Per Share (EPS) and dividends. Let’s also explore the importance of low PE ratio stocks in the market, who should invest in low PE stocks, calculations, strategies, and more.

What is the PE Ratio in the Share Market?

The PE full form in share market is Price-to-Earnings. This is the ratio of the current price of a company’s share with its EPS.

The most commonly used variable for the PE ratio calculation is the company’s earnings from the previous financial year. Investors commonly use it to determine the relative value of their company’s shares compared to others in the same sector.

Furthermore, the P/E ratio is also used by investors to compare a company against its historical records and aggregate markets against one another over time. The ratio can, therefore, be estimated on a backwards-looking or forward basis.

What this means is that the P/E Ratio can be used to:

• Compare a company’s financial performance with its past performance.
• Compare a company’s financial performance with others in the same business.
• Compare a benchmark index’s performance with its past performance.
• Compare a benchmark index’s performance with that of other similar indices.

The PE ratio is also referred to as price multiple or earnings multiple.

Additional Key Points:

• NSE PE Ratio: The PE ratio can vary across different indices, such as the Nifty 50 and Bank Nifty. Regularly checking the NSE PE ratio helps you monitor how the broader market is valued compared to individual stocks.
• Industry PE Ratio: Some industries naturally have higher or lower PE ratios. For example, tech companies might have higher PE ratios due to their growth potential, while utilities might have lower PE ratios due to their stable earnings. Comparing a stock’s PE ratio with its industry peers can give you a better perspective on whether it is undervalued.
• Negative PE Ratio: Be cautious of stocks with a negative PE ratio, which indicates that the company is currently unprofitable. While this doesn’t necessarily mean the stock is a poor investment, it warrants further investigation.

What are Low PE Stocks?

Low PE ratio stocks have a PE ratio lower than in their wider market or among other companies in the same industry. In share market terminology, the PE ratio is how much investors are willing to pay for each rupee of earnings a company makes. A low PE ratio, for example, may indicate that a stock is undervalued or that the market has little confidence in its future growth. This may be helpful when you are analysing the overall market valuation, such as the Nifty 50 PE ratio, to assess when it might be a good time to buy.

A low PE ratio could be one of the reasons a stock is more attractive to value investors, as it could mean it is traded at a reasonable price relative to its earnings. However, a low PE ratio could also signal potential issues with the company’s earnings or future growth prospects. This is why evaluating a low PE ratio alongside other metrics is crucial when considering an investment. While you can always find multiple low PE ratio stocks in the Indian stock market that may look attractive, thorough research is crucial to determine their real worth.

List of the Best Low PE Ratio Stocks in India 2024

Note: The stocks with low PE ratios are filtered using the below-mentioned parameters on Tickertape Stock Screener on 22nd August 2024.

• Stock Universe: Nifty 50
• PE Ratio: Set to Low – Sort from lowest to highest

Note that these stocks are in no order of preference. Please note that these stock selection criteria and the stocks are provided for informational purposes only; it is essential to conduct your own research.

High dividend Stocks with low PE ratios (Nifty 50)

Note: The stocks with low PE ratios and high dividends are filtered using the below-mentioned parameters on Tickertape Stock Screener on 22nd August 2024.

• Stock Universe: Nifty 50
• PE Ratio – Set to Low – Sort from lowest to highest
• Dividend Yield – Set to High

Note that these stocks are in no order of preference. Please note that these stock selection criteria and the stocks are provided for informational purposes only; it is essential to conduct your own research.

High EPS stocks with Low PE Ratio

Note: The stocks with low PE ratios and high EPS are filtered using the below-mentioned parameters on Tickertape Stock Screener on 22nd August 2024.

• Stock Universe: Nifty 50
• PE Ratio – Set to Low – Sort from lowest to highest
• 1Y Historical EPS Growth – Set to High

Note that these stocks are in no order of preference. Please note that these stock selection criteria and the stocks are provided for informational purposes only; it is essential to conduct your own research.

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Brief Overview of Low PE Ratio Companies of Nifty 50

Tata Steel Ltd

Tata Steel Ltd, established in 1907, is a major global player in the steel industry and a core part of the Tata Group. The company operates across the entire steel value chain, from mining iron ore and coal to producing a wide range of finished steel products. As of 22nd August 2024, Tata Steel Ltd has a market capitalisation of Rs. 1,92,421.16 cr. The stock’s closing price is Rs. 154.14, and the company has a negative PE ratio of -43.36.

Bharat Petroleum Corporation Ltd

Bharat Petroleum Corporation Ltd (BPCL) is a state-owned enterprise established in 1952. It operates in the Oil & Gas – Refining & Marketing sub-sector, with significant operations in refining, distributing, and marketing petroleum products throughout India. BPCL’s market capitalisation is Rs. 1,51,891.08 cr., with a closing price of Rs. 350.10. The company has a PE ratio of 5.66.

Oil and Natural Gas Corporation Ltd

Oil and Natural Gas Corporation Ltd (ONGC) was founded in 1956 and is India’s largest oil & gas – Exploration & Production sub-sector company. ONGC is crucial for India’s energy production, focusing on the exploration and production of crude oil and natural gas. ONGC has a market capitalisation of Rs. 4,08,041.36 cr., and its stock closed at Rs. 324.35. The company’s PE ratio is 8.29.

Coal India Ltd

Coal India Ltd, established in November 1975, is the world’s largest coal producer, operating under the Ministry of Coal, Government of India. The company dominates the Indian coal mining sector and is responsible for a significant portion of the country’s coal output. Coal India Ltd has a market capitalisation of Rs. 3,25,915.89 cr., and the stock closed at Rs. 528.85. The PE ratio of the company is 8.71.

State Bank of India

State Bank of India (SBI), founded in 1955, is the largest public sector bank in India, offering a wide array of banking services, including retail banking, corporate banking, and treasury operations. SBI plays a key role in India’s banking sector. The market capitalisation of SBI is Rs. 7,32,085.96 cr., with a closing price of Rs. 820.30. The bank has a PE ratio of 10.91.

IndusInd Bank Ltd

IndusInd Bank Ltd was established in 1994 and is a leading private sector bank in India. The bank provides a comprehensive range of financial services, including retail and corporate banking. IndusInd Bank Ltd has a market capitalisation of Rs. 1,07,626.33 cr., with a closing price of Rs. 1,381.90. The PE ratio is 11.99.

Tata Motors Ltd

Tata Motors Ltd, part of the Tata Group, was founded in 1945 and is a prominent global automobile manufacturer. The company operates in the Four Wheelers sub-sector, producing a wide range of vehicles, including passenger cars, trucks, and buses. The market capitalisation of Tata Motors Ltd is Rs. 3,92,613.36 cr., with a closing price of Rs. 1,068.45. The PE ratio is 12.5.

Axis Bank Ltd

Axis Bank Ltd, established in 1993, is one of India’s leading private-sector banks. The bank provides a wide array of financial services, including retail banking, corporate banking, and wealth management. Axis Bank Ltd has a market capitalisation of Rs. 3,61,726.99 cr., and the stock closed at Rs. 1,169.95. The PE ratio is 13.71.

Hindalco Industries Ltd

Hindalco Industries Ltd, founded in 1958, is a leading aluminium manufacturing company in India and a part of the Aditya Birla Group. The company operates in the Metals-Aluminium sub-sector and produces a wide range of aluminium and copper products. Hindalco Industries Ltd has a market capitalisation of Rs. 1,53,382.59 cr., with a closing price of Rs. 685.55. The PE ratio is 15.1.

Shriram Finance Ltd

Shriram Finance Ltd is a prominent player in the Consumer Finance sector, providing a wide range of financial products and services, including loans for vehicles, small businesses, and personal finance. The market capitalisation of Shriram Finance Ltd is Rs. 1,18,187.18 cr., with a closing price of Rs. 3,143.60. The PE ratio is 16.04.

Importance of Low PE Ratio in the Stock Market

A lower PE ratio in the stock market often means a company might be undervalued. However, it’s not just about finding any low PE stock; it’s about identifying quality companies that offer growth potential at a reasonable price. The ‘Nifty PE ratio today’ can serve as a good reference for comparing the valuation of individual stocks against the broader market.

1. Potential for Higher Returns:
   Investing in low PE stocks can lead to higher returns if there is an opportunity for the market to correct its stock valuation. For example, a company might have an artificially low PE ratio because the market undervalues it, but as the company’s true value becomes evident, the stock price could rise. The Nifty PE ratio chart can help you track historical trends and judge whether current valuations are high or low.
2. Margin of Safety:
   One key principle of value investing is the margin of safety, which a low PE ratio might provide. This margin means that if the company’s earnings decline in the future, the stock price may not fall as much because it is already priced relatively low. The current Nifty PE ratio can give you an idea of how the market is valued at a given point.
3. Lower Risk:
   Low PE stocks generally carry less risk because their prices are not inflated relative to their earnings, unlike high PE stocks. A high PE ratio often reflects investors’ high expectations for future earnings growth. However, the stock price could drop significantly if the company fails to meet these expectations. Low PE stocks somewhat mitigate this risk since their valuations are not based on high growth assumptions.

Features of Low PE Stocks

To explore low PE stocks, it’s important to understand the characteristics of these companies. These features can help you filter stocks and assess whether they align with your investment strategy based on their PE ratio, especially compared to the Nifty PE ratio or industry benchmarks.

1. Potential Undervaluation:
   Low PE stocks are usually undervalued, which is reflected in their low PE ratio. A stock priced at a lower PE ratio compared to the Nifty 50 PE or its industry peers could indicate that the market underestimates it. This can be due to various factors like temporary economic situations, sector-specific downturns, or a general lack of investor interest at the moment. However, it’s crucial to research the reason behind the low valuation, as not all undervalued stocks are good investment opportunities.
2. Stability in Earnings:
   Low PE stocks often exhibit stable or predictable earnings. Their PE ratios are generally lower than those of companies with high growth rates or cyclical earnings. This stability may appeal to investors who prefer reliable returns over the long term rather than quick profits. However, it’s always wise to check the ‘Nifty PE ratio today’ to see how valuations have been alongside such steadiness.
3. Dividends:
   Many low PE stocks are known for high dividend payouts, making them attractive to investors. These companies may choose to return some of their profits to investors instead of reinvesting all the money back into the business for growth. This can be appealing to those looking for regular income from their investments. When analysing the PE in stock market terms, dividend yield becomes an important factor in assessing the overall value of the stock.
4. Limited Growth Expectations:
   Low PE stocks often come with limited growth expectations. The market does not anticipate significant increases in the company’s earnings shortly, which is reflected in the lower valuation. However, this is not always negative. For value investors, such stocks can be interesting if the market has overly discounted the company’s prospects. You can compare the stock’s PE ratio to the Nifty PE ratio or industry PE ratio to gauge whether the market’s expectations are too conservative.
5. Lower Volatility:
   Low PE stocks typically exhibit less volatility than high PE stocks. This lower volatility often comes from being associated with more mature companies that have consistent earnings and a solid market presence. This makes them relatively less prone to sharp price fluctuations, which can be a blessing for risk-averse investors. When you look at the Nifty PE ratio as a benchmark, you’ll notice that periods of low market volatility often coincide with more low PE stocks.

How to Calculate Low PE Ratio Shares?

Calculating a low PE ratio isn’t just about figuring out the stock’s PE ratio alone; it’s also about comparing it with the average PE ratio of the market or the specific sector the stock belongs to. Here’s how to determine if a stock has a low PE ratio:

1. Calculate the Market or Sector Average PE Ratio:
   Identifying a low PE stock begins with finding the average PE ratio for the market or sector it’s in. This information can be found through financial news, online stock screeners, or market indices like the Nifty PE ratio or Nifty 50 PE ratio. For example, if you’re analysing stocks in the Nifty 50, you’d use the latest Nifty PE ratio.
2. Calculate the Stock’s PE Ratio:
   Next, determine the stock’s PE ratio using this formula:

PE Ratio =  Market Price per Share / Earnings per Share (EPS) 

​
You can find the current market price on platforms like the NSE, while the EPS is usually available in the company’s financial statements. For instance, if a stock trades at ₹50 per share and has an EPS of ₹5 over the last 12 months, the PE ratio would be:

PE Ratio =  ₹50/ ₹5 =10

3. Compare the Stock’s PE Ratio with the Market or Sector Average:
   Once you have the stock’s PE ratio, compare it with the average PE ratio of its market or sector. If the stock’s PE ratio is significantly lower, it could be considered a low PE stock.
   For example, if today’s Nifty 50 PE ratio is 25 and the stock you’re evaluating has a PE of 10, the stock is undervalued compared to the broader market or has lower growth expectations.
4. Analyse the Context of the Low PE Ratio:
   While a low PE ratio might suggest an undervalued stock, it’s crucial to understand the context. A low PE ratio compared to the Nifty PE ratio or industry PE ratio could be due to lower growth prospects, sector-specific challenges, or temporary setbacks. It’s important to research further to understand why the stock is valued lower than its peers.

Example Calculation:
Consider a scenario where the Nifty 50 index has an average PE ratio of 25. If you analyse a stock with the following details:

• Market Price per Share: ₹50
• Earnings per Share (EPS): ₹5
  The PE ratio for this stock would be:
  

PE Ratio = ₹50/ ₹5 ​= 10

In this case, the stock’s PE ratio of 10 is well below the average PE ratio of 25 for the Nifty 50 index, indicating it might be a low PE ratio stock, potentially undervalued.

Why Comparing PE Ratios is Important:
By comparing the stock’s PE ratio with broader benchmarks like the Nifty 50 PE ratio or its industry PE, you can gain insights into whether the stock trades at a discount relative to its earnings. This comparison helps understand the market’s sentiment toward the stock or sector. However, remember that a low PE ratio shouldn’t be the only factor in your investment decision. Considering other metrics and conducting further analysis is essential to ensure the stock aligns with your investment goals and risk tolerance.

Strategies For Identifying Low PE Ratio Stocks 

Identifying the best low PE ratio stocks requires careful analysis of the market. Here are some strategies to help you find them:

1. Use Stock Screeners:
   Tickertape Stock Screener is a great tool for identifying low PE ratio stocks. This tool allows you to filter stocks based on their PE ratio. For example, you can set a PE ratio filter to include only stocks with a PE ratio lower than the current Nifty PE ratio, helping you identify potentially undervalued stocks within the market.
2. Comparison with Industry PE Ratios:
   Not all low PE stocks are alike, as different industries have typical PE ratios. Comparing the PE ratio of a stock with its industry average gives you a better perspective. For instance, a PE ratio of 15 might be low for a tech company but high for a utility company. Understanding these industry standards can help you recognise genuinely undervalued stocks, not just those with low growth prospects.
3. Analyse Historical PE Ratios:
   A stock’s historical PE ratios can help you see if the current one stands out. If a stock is trading at half its historical PE multiple, it might suggest the stock is cheap based on historical metrics. Comparing its historical PE ratio with the Nifty PE ratio chart can show how it has fared against the broader market over time.
4. Assess Earnings Stability:
   A low PE ratio due to declining earnings is usually best avoided. You might consider looking for companies with consistent or growing earnings, as these may represent better investment opportunities. This approach helps you avoid companies that appear cheap but have underlying issues.
5. Realise the Bigger Picture of the Economic Environment:
   Low PE ratios sometimes relate to broader economic conditions rather than company-specific issues. During market downturns, even strong companies might trade at lower valuations. Comparing a stock’s PE ratio with sector benchmarks and the Nifty 50 can help determine if the low valuation is part of a broader trend, potentially offering opportunities to buy quality stocks at discounted prices.
6. Invest in Dividend-Producing Stocks:
   Low PE ratio stocks that offer dividends can provide additional value. These companies usually have steady earnings and cash flows, allowing them to return profits to shareholders regularly. When evaluating such stocks, ensure the PE ratio balances with the dividend yield for a good mix of income and potential capital appreciation.
7. Do Your Homework on Company Fundamentals:
   Thorough research into a company’s fundamentals is essential. A low PE ratio alone doesn’t make a stock worth buying. Investigate the company’s business model, competitive advantages, management quality, and long-term growth prospects. A low PE ratio could represent a buying opportunity if the fundamentals are strong. Comparing these findings with the PE ratio of Nifty 50 stocks can provide a benchmark for assessing your investment choice.

Who Should Invest in Low PE Stocks?

Investing in low PE stocks can be appealing to various types of investors, but it’s not for everyone. Understanding who might benefit the most from these investments can help determine if they align with your financial goals and risk tolerance.

1. Value Investors:
   Low PE stocks are often sought after by value investors who look for stocks the market undervalues. By focusing on low PE stocks, value investors aim to find companies trading below their intrinsic value, offering the potential for significant upside over time. Low PE stocks could be a key part of your portfolio if this investment philosophy resonates with you.
2. Long-Term Investors:
   Low PE stocks are generally more suitable for long-term investors who can wait for the market to recognise the stock’s true value. These stocks might take time to appreciate, especially if traders are focused on short-term gains elsewhere. Long-term investors prioritising steady appreciation over quick gains might find low PE stocks appealing.
3. Dividend-Focused Investors:
   Dividend investors who focus on income might also be interested in low PE stocks. These companies often have stable earnings that allow them to pay regular dividends, even if they don’t see high capital growth. If you seek income alongside potential capital appreciation, low PE stocks with solid dividend yields could be a good fit for your portfolio.
4. Risk-Averse Investors:
   Although investing in low PE stocks carries risk, these stocks tend to be less volatile than high PE growth stocks. This lower volatility can attract risk-averse investors who prioritise safety in their investments. If you prefer steadier gains over big upside potential, low PE stocks might align with your risk tolerance.
5. Contrarian Investors:
   Contrarian investors, who like to go against market sentiment, may find opportunities in low PE stocks. These investors often seek stocks the market is pessimistic about, believing they are undervalued. Low PE stocks could present attractive opportunities if you think the market will turn around or if a stock has an unreasonably low valuation.
6. Investors Seeking Bargains During Market Downturns:
   Even high-quality stocks can see their PE ratios fall below average during economic downturns or market corrections. For opportunistic investors willing to buy during these periods, low PE stocks might offer bargains that could pay off when the market recovers. If you’re comfortable with the risks of buying in a down market, this could be an ideal time to explore low PE stocks.
7. Investors Who Prioritize Fundamental Analysis:
   Low PE stocks may appeal to investors who emphasise fundamental analysis. These stocks often require rigorous analysis of financial statements, management quality, and industry conditions to ensure that the low PE ratio reflects undervaluation rather than underlying problems. Low PE stocks could fit well within your strategy if you enjoy making data-driven investment decisions.

Why Low PE Ratio Shares are Attractive?

Low PE ratio shares have long been favoured by investors who are keen on finding opportunities where the market might have overlooked potential. These stocks often provide a unique blend of value and opportunity that can appeal to both seasoned investors and those looking to build a diversified portfolio. Here’s why low PE ratio shares might be particularly attractive:

1. Indicator of Value Relative to Earnings:
A low PE ratio suggests that the price of a stock is low compared to the company’s earnings. This can be an indicator that the stock is undervalued relative to its actual earnings power. For investors who focus on the relationship between price and earnings, this can be a key sign that the market has not fully recognised the stock’s potential. When you compare these shares against the Nifty 50 PE ratio today, a stock with a low PE ratio might stand out as a bargain in a market where valuations are generally higher.

2. Investment in Mature Companies:
Low PE ratio stocks are often associated with mature companies with stable and consistent earnings. These companies might not be in high-growth phases, but their earnings reliability makes them appealing, particularly for investors looking for steady returns rather than speculative gains. Such stocks might not generate the excitement of high-growth stocks, but they can provide a solid foundation for a portfolio. Investors seeking stability might find low PE ratio shares attractive because they often represent companies with established market positions.

3. Less Market Hype:
Stocks with low PE ratios are typically not the ones being hyped in the media or chased by momentum investors. This lack of attention can actually work in your favour if you’re looking for undervalued opportunities. The broader market might overlook these stocks because they lack the excitement of high-growth stories, but this can lead to mispricing. For a patient investor, low PE ratio shares might represent a chance to buy quality companies without paying a premium driven by market sentiment.

4. Potential for Dividend Income:
Many low PE ratio stocks are from companies that generate consistent profits, which can translate into regular dividend payments. This combination of low valuation and regular income can be particularly appealing for income-focused investors. Stocks with a low PE ratio might offer higher dividend yields since the stock price is lower relative to the earnings being distributed. This makes low PE ratio shares attractive for those seeking capital preservation and a steady income stream.

5. Opportunities in Economic Downturns:
Even strong companies can see their stock prices decline during economic downturns, leading to lower PE ratios. However, these companies might still have solid earnings potential, making them attractive buys in a down market. When the economy recovers, these undervalued stocks could experience significant price appreciation. Thus, investors who are willing to invest during market corrections might find low PE ratio stocks particularly attractive, as they can purchase strong companies at discounted prices.

6. Appeal to Contrarian Investors:
Contrarian investors, who look for opportunities where others see risks, often find low PE ratio stocks attractive. These investors thrive on going against the grain, buying into companies that most of the market has undervalued or ignored. For them, low PE stocks represent a chance to capitalise on the market’s mistakes. By identifying stocks with low PE ratios that are fundamentally strong, contrarians can potentially reap significant rewards when the market sentiment eventually shifts.

7. Long-Term Capital Appreciation:
While low PE ratio stocks might not offer explosive short-term growth, they can be excellent candidates for long-term capital appreciation. As the company generates earnings and the market gradually recognises its value, the stock price may appreciate steadily over time. This gradual increase can result in substantial long-term gains, making low PE ratio stocks particularly attractive for investors with a long-term horizon willing to hold onto their investments through various market cycles.

To Conclude

If you are looking for undervalued stocks, then analysing low PE ratio stocks can be a useful strategy. However, it is important to conduct thorough research and analysis to ensure that the company’s fundamentals justify the low PE ratio and are not indicative of underlying issues. It is always worthwhile to consult a financial advisor before investing. 

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FAQs About the Low PE Stocks in India

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Anjali Chourasiya

I am a finance enthusiast who loves exploring the world of money through my lens. I’ve been dedicated to building systems that work and curating content that helps people learn.

As an insatiable reader and learner, I’ve spent the last two years exploring the world of finance. With my creative mind and curious spirit, I love making complex finance topics easy and fun for everyone to understand. Join me on my journey as we navigate the world of finance together!

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