Nifty P/E Ratio Chart and how to get to this data

by Manshu on September 21, 2011

in Investments

This is another post from the Suggest a Topic page, and today I’m going to write about how you an access the P/E ratios of various Indian sectoral indices and a few thoughts on this data.

The new NSE website makes it quite easy to get the P/E, P/B, Dividend Yield on all the main indices and here’s how you can do that.

First go to the NSE website and look for Products –> Indices.

Nifty PE Data 1

Nifty PE Data 1

Next, look at Historical Data, and View P/B and Dividend Yield.

And finally select an index and a time period to generate data for that.

The second part of the question was what is the average of the various indices, and if this information is even useful.

I don’t know how useful the average will be and my guess is that you are better off looking at a median and that too just for reference, and specifically to tell you of extreme situations.

A chart that I have used here quite often is the historical Nifty P/E Ratio data, and here is the latest chart for data from Jan 2001 till yesterday.

Nifty P/E Chart

Nifty P/E Chart

If you look at the chart above you will see that the Nifty P/E has never gone above 28, and has never fallen into single digits either.

So, when the P/E of this index is close to these numbers it gives you an indication that the market is cheap or expensive.

But, that’s only in hindsight.

In real time – you can’t be sure if the world is going to come to an end or if the world has discovered a new system whereby old economic cycles don’t matter anymore.

I think a great example of this is my own post from October 2008 in which I wrote about P/E ratios being the lowest in the past 8 years, and despite that investor interest being very very low in the stock market.

If you can remember the mood, and I certainly can – you will remember that the share market was the last thing that anyone wanted to talk about.

So, my take on the P/E ratio is that it can be and is indeed a useful measure but I’m really skeptical of people who say we will start investing when the P/E falls below this level, and start selling when the P/E rises beyond that level because I haven’t seen that working well in the real world.

 

{ 6 comments… read them below or add one }

Hemant Beniwal September 25, 2011 at 8:58 am

Hi Manshu,
No comment on such a superb post suggests that still people are not ready to invest in equities. πŸ™

Reply

Manshu September 25, 2011 at 9:26 pm

Thanks Hemant – this is what happens when people are not diversified to begin with and don’t have enough in fixed income. I would like to see the guys who were commenting about comparing FDs to equity returns a few months ago and see what they are doing today.

Reply

J May 18, 2012 at 11:36 am

Thank you!

Reply

Mmurthy August 1, 2012 at 7:13 pm

Hi,

Just wanted to clarify – have you used the trailing twelve month PEs or 1-year forward PEs in the above chart?

Good article. Cheers.

Reply

brian October 21, 2012 at 2:37 pm

Thank You Sooo much. Was very very helpful.

Reply

param January 25, 2013 at 1:50 am

Would like to read more on nifty p/e to make the concept more clear.
What is nifty p/e in jan2013 ??

Reply

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