Nifty PE Below 20: Is It the Right Time to Enter the Market?

The Nifty Price-to-Earnings (P/E) ratio is a key valuation metric that compares the current price of the Nifty 50 index to its earnings per share. It helps investors assess whether the index is overvalued or undervalued relative to its earnings. 

A higher P/E suggests the market is willing to pay more for each unit of earnings, often reflecting high growth expectations, while a lower P/E may indicate undervaluation or lower growth prospects.

Nifty PE Drops Below 20 for the first time in 32 months

Over the past five years, the Nifty P/E ratio has dropped below the 20-level only twice. The first instance occurred after the Russia-Ukraine war, when it fell to 18.92 between May and July 2022. The second drop is happening now, as global uncertainty continues to impact markets. 

At its peak in last September, the Nifty P/E stood at 24.38. Since then, the index has lost about 16 percent of its value. Due to slower earnings growth and the price correction, the multiples have also come down.

The steepest valuation dip was recorded at 17.15 on March 23, 2020, when pandemic-induced panic led to a 13 percent crash in a single session, according to NSE data.

Reason for the P/E Decline

The Nifty 50’s price-to-earnings (P/E) ratio has dropped below 20 for the first time since July 2022, indicating a major change in market valuations. This drop is mainly due to continued selling by Foreign Institutional Investors (FIIs), with outflows totaling $13 billion in 2025 alone. In the past five months, FII net sales in the equity cash segment have exceeded Rs 3 lakh crore, putting extra pressure on the market.

Analysts believe the selling may continue as global investors become more cautious about emerging markets. With the potential for new tariffs under a future US administration, investors may prefer the US market over emerging markets for their investments.

Also read: 5 Fundamentally strong stocks that are currently trading in oversold zone with RSI less than 30

Is this the right time to invest?

As per Brokerage firms, even with the recent drop in valuations, there are mixed opinions on whether the Indian markets are a good buying opportunity, with some believing it’s a good time to invest, while others are more cautious.

Kotak Institutional Equities is not convinced about the market. While they recognize the sharp decline in Indian markets this year, they feel that most sectors still don’t offer good value. They also advised not to focus too much on capital flows, as they haven’t been reliable in predicting market peaks or bottoms.

Krishna Appala, Senior Analyst at Capitalmind Research, believes that history may repeat itself, presenting a long-term opportunity pointed out that past market downturns, like the Lehman crash, Taper Tantrum, Demonetization, and Covid, were seen as strong buying opportunities in hindsight.

He added that Today’s market decline may feel tough, but history shows it will likely be seen as an opportunity in the future. Over the past 30 years, markets have dropped more than 20 percent several times, but in 22 of those years, they ended positively.

List of Nifty 50 stocks trading at a discount to keep on your radar 

• Tata Motors Limited opened at Rs. 654.65 in Thursday’s session trading at a discount of 44.47 percent compared to the 52 week high of Rs. 1,179.05.
• Hero MotoCorp Ltd opened at Rs. 3639.95 in Thursday’s session trading at a discount of 41.7 percent compared to the 52 week high of Rs. 6,246.25.
• Bajaj Auto Ltd opened at Rs. 7499.95 in Thursday’s session trading at a discount of 41.2 percent compared to the 52 week high of Rs. 12,774.
• Trent Ltd opened at Rs. 5199.25 in Thursday’s session trading at a discount of 37.7 percent compared to the 52 week high of Rs. 8,345.85.

Written by Sridhar J 

Disclaimer

The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post Nifty PE Below 20: Is It the Right Time to Enter the Market? appeared first on Trade Brains.