What are the P/E and the Price to Book (P/BV) ratio of some of the key indices and how has the trend moved in the last few years?
Answer
The P/E ratio and the P/BV ratio are extremely dynamic so we can get a clear picture by looking at the month wise picture over a period of time to see how these ratios have been trending. Note that high P/E or low P/E in isolation cannot be construed as a signal to buy or sell. All ratios in this table are in absolute ratios only.
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| Price to Earnings Ratio | Price to Book-Value Ratio | ||||||
| Month | S&P BSE Sensex | S&P BSE 100 | Nifty 50 | Nifty Next 50 | S&P BSE Sensex | S&P BSE 100 | Nifty 50 | Nifty Next 50 |
| Apr-10 | 20.7 | 20.8 | 22.3 | 15.5 | 3.7 | 3.9 | 3.8 | 3.2 |
| May-10 | 20.4 | 20.2 | 21.3 | 16.6 | 3.5 | 3.7 | 3.6 | 3.2 |
| Jun-10 | 21.1 | 21.3 | 22.3 | 17.2 | 3.4 | 3.5 | 3.8 | 3.3 |
| Jul-10 | 21.2 | 22.4 | 22.3 | 18.2 | 3.4 | 3.5 | 3.8 | 3.3 |
| Aug-10 | 21.4 | 22.7 | 22.7 | 18.3 | 3.4 | 3.5 | 3.5 | 3.2 |
| Sep-10 | 23.8 | 24.8 | 25.5 | 20.0 | 3.8 | 3.9 | 3.8 | 3.5 |
| Oct-10 | 23.2 | 24.6 | 24.7 | 19.9 | 3.8 | 3.9 | 3.8 | 3.4 |
| Nov-10 | 22.4 | 22.2 | 23.4 | 17.7 | 3.6 | 3.7 | 3.7 | 3.3 |
| Dec-10 | 23.6 | 23.0 | 24.5 | 17.6 | 3.8 | 3.9 | 3.9 | 3.2 |
| Jan-11 | 20.0 | 19.9 | 21.1 | 15.4 | 3.5 | 3.5 | 3.5 | 2.9 |
| Feb-11 | 19.4 | 19.1 | 20.4 | 14.7 | 3.4 | 3.4 | 3.4 | 2.8 |
| Mar-11 | 21.2 | 20.7 | 22.1 | 16.2 | 3.7 | 3.7 | 3.7 | 3.1 |
| Apr-11 | 20.5 | 20.8 | 21.4 | 16.9 | 3.6 | 3.8 | 3.7 | 3.4 |
| May-11 | 19.7 | 20.0 | 20.5 | 16.0 | 3.6 | 3.8 | 3.5 | 3.4 |
| Jun-11 | 19.9 | 20.2 | 20.8 | 15.6 | 3.5 | 3.4 | 3.5 | 3.1 |
| Jul-11 | 18.9 | 19.4 | 19.8 | 15.0 | 3.4 | 3.3 | 3.4 | 3.0 |
| Aug-11 | 18.4 | 17.4 | 18.1 | 13.7 | 3.4 | 3.0 | 3.0 | 2.4 |
| Sep-11 | 18.0 | 17.1 | 17.9 | 13.4 | 3.3 | 2.9 | 2.9 | 2.4 |
| Oct-11 | 18.8 | 17.8 | 18.9 | 14.1 | 3.5 | 3.1 | 3.2 | 2.4 |
| Nov-11 | 17.1 | 17.8 | 17.5 | 14.7 | 3.3 | 2.8 | 2.9 | 2.1 |
| Dec-11 | 16.4 | 16.9 | 16.8 | 13.5 | 3.1 | 2.7 | 2.8 | 1.9 |
| Jan-12 | 17.7 | 18.6 | 18.5 | 15.8 | 3.4 | 3.0 | 3.0 | 2.2 |
| Feb-12 | 18.3 | 19.3 | 19.1 | 15.9 | 3.6 | 3.2 | 3.0 | 2.3 |
| Mar-12 | 17.8 | 18.8 | 18.7 | 15.9 | 3.5 | 3.1 | 3.0 | 2.3 |
| Apr-12 | 17.6 | 18.6 | 18.1 | 17.5 | 3.2 | 2.7 | 3.1 | 2.2 |
| May-12 | 15.9 | 17.0 | 16.7 | 16.1 | 3.0 | 2.5 | 2.9 | 2.1 |
| Jun-12 | 17.0 | 17.0 | 17.5 | 15.5 | 3.2 | 2.7 | 3.0 | 2.2 |
| Jul-12 | 16.6 | 16.6 | 17.1 | 15.1 | 2.7 | 2.4 | 3.0 | 2.2 |
| Aug-12 | 16.5 | 18.8 | 17.6 | 17.5 | 2.7 | 2.4 | 2.9 | 2.1 |
| Sep-12 | 17.5 | 20.3 | 19.2 | 20.0 | 2.9 | 2.5 | 3.2 | 2.2 |
| Oct-12 | 16.8 | 19.5 | 18.4 | 18.9 | 2.9 | 2.5 | 3.0 | 2.1 |
| Nov-12 | 17.5 | 17.8 | 18.6 | 16.9 | 3.0 | 2.6 | 3.1 | 2.2 |
| Dec-12 | 17.5 | 17.6 | 18.7 | 17.8 | 3.0 | 2.6 | 3.1 | 2.3 |
| Jan-13 | 17.9 | 17.9 | 18.5 | 17.3 | 3.1 | 2.7 | 3.2 | 2.3 |
| Feb-13 | 17.4 | 16.7 | 17.7 | 17.2 | 3.0 | 2.6 | 3.0 | 2.2 |
| Mar-13 | 17.2 | 16.3 | 17.6 | 16.8 | 3.0 | 2.6 | 3.0 | 2.1 |
| Apr-13 | 17.5 | 18.6 | 17.9 | 18.7 | 2.9 | 2.5 | 3.1 | 2.3 |
| May-13 | 17.6 | 16.7 | 18.0 | 19.2 | 3.1 | 2.7 | 3.2 | 2.3 |
| Jun-13 | 17.2 | 16.2 | 17.8 | 16.9 | 2.9 | 2.6 | 3.0 | 2.1 |
| Jul-13 | 17.2 | 15.9 | 17.1 | 16.8 | 3.0 | 2.6 | 2.8 | 2.1 |
| Aug-13 | 17.0 | 14.4 | 15.8 | 12.9 | 2.9 | 2.5 | 2.7 | 2.0 |
| Sep-13 | 16.8 | 15.9 | 16.8 | 13.4 | 2.8 | 2.4 | 2.8 | 2.0 |
| Oct-13 | 18.3 | 17.3 | 18.2 | 14.6 | 2.8 | 2.4 | 3.0 | 2.2 |
| Nov-13 | 17.6 | 16.9 | 18.4 | 15.1 | 2.6 | 2.3 | 2.9 | 2.2 |
| Dec-13 | 18.2 | 17.3 | 18.7 | 16.0 | 2.6 | 2.3 | 3.0 | 2.3 |
| Jan-14 | 17.1 | 16.3 | 17.7 | 14.7 | 2.6 | 2.3 | 2.9 | 2.2 |
| Feb-14 | 17.2 | 16.4 | 17.7 | 15.5 | 2.5 | 2.2 | 3.0 | 2.2 |
| Mar-14 | 18.3 | 17.8 | 18.9 | 17.3 | 2.7 | 2.4 | 3.2 | 2.3 |
| Apr-14 | 18.3 | 17.8 | 18.8 | 17.4 | 2.7 | 2.5 | 3.2 | 2.3 |
| May-14 | 17.9 | 17.8 | 19.8 | 19.0 | 2.8 | 2.5 | 3.4 | 2.6 |
| Jun-14 | 18.6 | 18.6 | 20.7 | 21.9 | 2.8 | 2.6 | 3.5 | 2.7 |
| Jul-14 | 18.5 | 18.6 | 20.6 | 21.0 | 2.9 | 2.6 | 3.5 | 2.7 |
| Aug-14 | 18.2 | 18.2 | 20.8 | 20.4 | 2.9 | 2.7 | 3.5 | 2.7 |
| Sep-14 | 18.5 | 18.6 | 20.8 | 20.5 | 3.0 | 2.7 | 3.4 | 2.7 |
| Oct-14 | 18.3 | 18.3 | 21.6 | 20.7 | 2.9 | 2.7 | 3.5 | 2.8 |
| Nov-14 | 19.2 | 19.2 | 21.9 | 20.7 | 3.0 | 2.8 | 3.6 | 2.8 |
| Dec-14 | 18.8 | 18.9 | 21.2 | 20.7 | 3.0 | 2.7 | 3.5 | 2.7 |
| Jan-15 | 19.2 | 19.5 | 22.5 | 21.5 | 3.1 | 2.8 | 3.7 | 2.9 |
| Feb-15 | 19.7 | 20.1 | 23.8 | 21.1 | 3.1 | 2.9 | 3.8 | 3.0 |
| Mar-15 | 19.5 | 20.0 | 22.7 | 22.8 | 3.1 | 2.9 | 3.7 | 2.9 |
| Apr-15 | 19.4 | 19.9 | 22.1 | 22.2 | 3.0 | 2.8 | 3.5 | 2.9 |
| May-15 | 19.9 | 20.2 | 23.1 | 20.9 | 3.0 | 2.8 | 3.7 | 3.0 |
| Jun-15 | 20.7 | 20.8 | 23.2 | 21.9 | 3.0 | 2.7 | 3.5 | 2.9 |
| Jul-15 | 22.5 | 22.2 | 23.5 | 23.0 | 3.1 | 2.8 | 3.5 | 3.0 |
| Aug-15 | 21.9 | 21.9 | 22.1 | 22.1 | 3.0 | 2.7 | 3.2 | 2.9 |
| Sep-15 | 20.6 | 20.7 | 22.2 | 21.8 | 2.8 | 2.6 | 3.2 | 3.0 |
| Oct-15 | 21.8 | 21.8 | 22.1 | 21.1 | 2.9 | 2.7 | 3.2 | 2.8 |
| Nov-15 | 20.6 | 20.8 | 21.5 | 21.7 | 2.8 | 2.5 | 3.2 | 2.8 |
| Dec-15 | 19.9 | 20.6 | 21.5 | 22.1 | 2.7 | 2.5 | 3.2 | 2.8 |
| Jan-16 | 18.5 | 19.7 | 20.2 | 20.3 | 2.7 | 2.4 | 3.0 | 2.6 |
| Feb-16 | 17.5 | 18.7 | 18.9 | 20.1 | 2.6 | 2.3 | 2.8 | 2.4 |
| Mar-16 | 18.6 | 20.0 | 20.9 | 22.0 | 2.7 | 2.4 | 3.1 | 2.7 |
| Apr-16 | 19.3 | 20.8 | 21.2 | 22.4 | 2.8 | 2.6 | 3.3 | 2.7 |
| May-16 | 19.0 | 20.5 | 22.6 | 24.3 | 2.7 | 2.5 | 3.4 | 2.7 |
| Jun-16 | 19.5 | 20.9 | 22.8 | 25.9 | 2.8 | 2.6 | 3.4 | 2.8 |
| Jul-16 | 20.3 | 21.6 | 23.6 | 28.8 | 2.9 | 2.7 | 3.4 | 3.1 |
| Aug-16 | 20.6 | 23.2 | 24.1 | 29.6 | 3.0 | 2.8 | 3.4 | 3.1 |
| Sep-16 | 21.2 | 23.8 | 23.4 | 30.5 | 3.0 | 2.8 | 3.3 | 3.3 |
| Oct-16 | 21.1 | 23.9 | 23.3 | 30.2 | 2.9 | 2.8 | 3.3 | 3.4 |
| Nov-16 | 20.6 | 22.9 | 21.6 | 25.9 | 2.7 | 2.6 | 3.1 | 3.4 |
| Dec-16 | 20.6 | 22.5 | 21.9 | 25.1 | 2.7 | 2.5 | 3.1 | 3.3 |
| Jan-17 | 23.2 | 21.2 | 22.9 | 27.0 | 2.6 | 2.8 | 3.3 | 3.6 |
| Feb-17 | 24.0 | 21.9 | 23.1 | 25.0 | 2.7 | 2.9 | 3.4 | 3.8 |
| Mar-17 | 24.4 | 22.4 | 23.3 | 27.2 | 2.8 | 2.9 | 3.5 | 3.5 |
| Apr-17 | 24.9 | 22.6 | 23.6 | 28.4 | 2.8 | 3.0 | 3.6 | 3.6 |
| May-17 | 24.3 | 22.7 | 24.4 | 29.4 | 2.8 | 2.9 | 3.6 | 3.7 |
| Jun-17 | 22.7 | 22.7 | 24.2 | 27.5 | 2.8 | 3.0 | 3.5 | 3.7 |
| Jul-17 | 23.1 | 23.4 | 25.7 | 29.2 | 3.0 | 3.1 | 3.5 | 3.9 |
| Aug-17 | 23.7 | 23.8 | 25.6 | 31.5 | 3.0 | 3.1 | 3.5 | 3.9 |
| Sep-17 | 23.9 | 23.8 | 25.4 | 31.6 | 3.1 | 3.0 | 3.4 | 3.2 |
| Oct-17 | 24.3 | 24.2 | 26.4 | 33.9 | 3.1 | 3.1 | 3.5 | 3.5 |
| Nov-17 | 24.6 | 24.6 | 26.2 | 36.5 | 3.1 | 3.1 | 3.5 | 3.5 |
| Dec-17 | 24.6 | 24.7 | 26.9 | 37.8 | 3.1 | 3.1 | 3.6 | 3.6 |
| Jan-18 | 25.7 | 25.5 | 27.5 | 37.7 | 3.2 | 3.2 | 3.7 | 3.6 |
| Feb-18 | 24.0 | 23.8 | 25.7 | 35.8 | 3.2 | 3.1 | 3.5 | 3.4 |
| Mar-18 | 23.0 | 22.8 | 24.7 | 34.7 | 3.1 | 3.0 | 3.4 | 3.3 |
| Apr-18 | 23.4 | 23.3 | 26.7 | 35.5 | 3.1 | 3.1 | 3.7 | 3.6 |
| May-18 | 23.4 | 22.9 | 27.2 | 33.8 | 3.1 | 3.0 | 3.7 | 3.4 |
| Jun-18 | 22.9 | 22.4 | 25.9 | 40.9 | 3.0 | 2.9 | 3.6 | 3.3 |
| Jul-18 | 23.1 | 22.8 | 28.2 | 46.5 | 3.0 | 2.9 | 3.7 | 3.4 |
| Aug-18 | 24.5 | 23.8 | 28.4 | 44.0 | 3.2 | 3.1 | 3.8 | 3.5 |
| Sep-18 | 24.1 | 23.3 | 26.4 | 38.7 | 3.1 | 3.0 | 3.5 | 3.9 |
| Oct-18 | 22.2 | 21.3 | 25.0 | 38.2 | 2.9 | 2.8 | 3.3 | 3.8 |
| Nov-18 | 23.0 | 22.1 | 26.3 | 41.3 | 3.0 | 2.9 | 3.4 | 3.9 |
| Dec-18 | 23.5 | 22.5 | 26.2 | 42.4 | 3.0 | 2.9 | 3.4 | 4.0 |
One thing you can see straight away from this data is that P/E ratios have gone up across all the indices over the period of time. However, the gradual overpricing has been the sharpest in case of the Nifty Next 50 Index, which is a signal that these mid caps earnings have failed to keep pace with the price and that is perhaps one reason for the sharp correction we have seen in these stocks.
The price earnings ratio or the P/E ratio is the Price of the stock to the EPS of the stock. It can also be looked at as the ratio of the market cap of the stock to the net profits of the stock. The P/E ratio is also one of the basic approaches to valuation and the P/E is a function of a variety of factors. Normally, companies with high growth, high ROE and low debt tend to enjoy high P/E ratios. High P/E ratios can also be seen in case of companies with strong brands or with pedigreed managements. P/E ratio must also be looked at with respect to growth which is why you normally tend to look at the PEG ratio to get a better picture.
P/BV ratio is the ratio of the price of the stock to the book value of the stock. You can also interpret as the ratio of the market cap of the stock to the net worth of the company. This ratio is also a valuation ratio but it is more useful for banks, financials and for companies that are currently making losses.
The table below captures the P/E and P/BV of some key indices on NSE.
Index
P/E ratio
P/BV ratio
Dividend Yield
Nifty 50
27.47
3.67
1.26
Nifty Next 50
39.90
3.73
1.17
Nifty 500
29.38
3.33
1.22
Nifty Mid Cap 50
22.24
2.01
1.48
Nifty Small Cap 50
23.97
1.76
1.05
Nifty Auto Index
22.83
3.72
1.31
Nifty FMCG Index
40.72
11.22
1.24
Nifty IT Index
20.73
5.14
1.98
Nifty Metals Index
9.73
1.07
4.75
Nifty Pharma Index
31.08
3.10
0.66
Nifty Private Banks
39.62
3.69
0.39
Nifty PSU Banks
N.A.
0.74
0.04
Nifty CPSE Index
9.04
1.37
5.02
As can be seen in the above table, private banks and FMCG have a high P/E while sectors like metals and CPSEs have very low P/E levels