What, Why, and When: Understanding indexpe.in

The Problem We Solve

When you look at the Indian stock market today, a question lingers in the minds of many investors: Is this index expensive or cheap? The Nifty 50 trades at a PE of 22.7, but is that expensive? How does it compare to what it was worth in the past? Without historical context, this number is meaningless—and that's precisely why indexpe.in exists.

Most investors lack a quick, intuitive way to understand if an entire index is overvalued or undervalued relative to its historical norms. Market websites bombard you with raw data. Financial channels give conflicting opinions. What's missing is a simple, visual, data-driven tool that puts valuation in perspective.

indexpe.in fills this gap by tracking 120+ Indian indices with a focus on their median PE ratios across 7 years of history. It's built on a principle that has guided value investors for decades: understanding where valuations stand relative to their historical range is essential for making informed investment decisions.

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Why PE Ratios Matter (Historical Context)

The Origins of PE Ratio Analysis

The Price-to-Earnings (PE) ratio is one of the most fundamental valuation metrics in investing. It's elegantly simple: divide the price of a stock (or index) by its annual earnings per share. The result tells you how much investors are willing to pay for every rupee of earnings (source).

Benjamin Graham, the father of value investing, popularized this metric decades ago (source, source). The insight was powerful: instead of looking at price alone, compare it to what the company actually earns. A stock at ₹100 means nothing without knowing if the company earns ₹5 per share (PE = 20) or ₹20 per share (PE = 5). Graham and David Dodd's groundbreaking work in "Security Analysis" (1934) established the framework for PE ratio comparison that remains the foundation for value investing today (source).

Why Index PE Ratios Work

When you apply the PE ratio to an entire index like Nifty 50, you get something equally powerful: the average valuation of all 50 companies combined. This tells you whether the entire index is trading at a premium or discount to its historical average.

According to NSE methodology and financial data sources, the NSE calculates index PE as (source, source):

Index PE = Total Market Cap of Index / Total Earnings of Index Constituents

This single number encapsulates investor sentiment, earnings expectations, and market risk appetite across an entire segment. As Morningstar India's research demonstrates, the median PE ratio and historical trends provide a crucial lens for understanding market behavior (source).

The Median PE Advantage

While current PE tells you what the market is paying right now, median PE tells you what it has historically paid. This distinction is critical. As renowned valuation expert Aswath Damodaran has documented in his comprehensive research on earnings multiples, using the median PE rather than the average PE reduces the impact of outliers and provides a more robust measure of fair valuation (source, source).

Consider the Nifty 50 from 2004-2025 (source, source):

• Lowest PE: 12.23 (mid-2004 - deeply undervalued)
• Highest PE: 40.92 (early 2021 - extremely overvalued during the pandemic-driven rally)
• Median PE: ~20 (the "normal" or fair value range)

When current PE is below the median, the index is cheaper than usual—potentially a better entry point. When it's above the median, the index is more expensive—suggesting caution or selective buying.

Morningstar India's historical analysis reveals that the Sensex has spent approximately 70% of the time trading above its median PE of 18.5-19, with the overvalued zone beginning at PE above 21 (source). Without knowing the median, a PE of 22 tells you nothing. With it, you know the market is paying slightly more than its historical average, but not in bubble territory.

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The Best Use Cases for indexpe.in

1. Asset Allocation & Market Timing (Tactical Decisions)

If you're deciding whether to increase or decrease equity exposure, indexpe.in gives you objective data:

• When multiple indices are undervalued (PE < median): The market is offering better bargains. This might be a time to increase equity allocation.
• When most indices are expensive (PE > median): The market is crowded with optimism. This might warrant trimming exposure or waiting for better entry points.

Real Example: In mid-2024, Nifty 50 PE was around 21.5 while its median is ~20. This suggests the market is fairly valued—not a screaming buy, but not a sell signal either. This helps you calibrate your market outlook without being emotional.

2. Sector Rotation

Different sectors have different "normal" PE ranges. indexpe.in's 120+ indices include:

• Broad market indices (Nifty 50, Nifty 500)
• Sectoral indices (Bank Nifty, Auto, Pharma, IT, etc.)
• Special themes (PSU, Dividend, Smallcap, etc.)

By comparing PE valuations across sectors, you can identify which sectors are relatively cheaper. This data-driven approach aligns with the methodology advocated by research from Morningstar India, which demonstrates that sector PE comparison is a reliable method for tactical allocation (source).

• Bank Nifty trading at PE 14 while its median is 16? Banks might offer better value.
• IT Nifty at PE 28 while median is 24? Tech is pricing in strong growth—be selective.

3. Long-Term Investment Planning

If you're a systematic investor (SIP-based or lump-sum), indexpe.in helps you understand market cycles:

• How often do indices go above/below median? This helps set expectations.
• What's a reasonable entry point for your next big investment? Index valuations guide timing within your long-term strategy.

Research from PrimeInvestor's analysis of 20-year Nifty PE trends demonstrates that understanding these cycles significantly improves long-term returns (source).

4. Contrarian Investing Signals

Contrarian investors thrive when the majority is pessimistic (and assets are cheap) or when the majority is euphoric (and assets are expensive). indexpe.in provides the objective metrics:

• When an index crashes and trades at PE 13 (well below median of 20), contrarians know it's worth considering.
• When an index soars to PE 35 (above its historical range), contrarians know it's warning time.

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The Worst Use Cases (Where indexpe.in Falls Short)

1. Single Stock Selection

Don't use indexpe.in to pick individual stocks. An index PE can hide important truths about individual constituents. For example:

• Nifty 50 might have a PE of 22, but within it, some stocks are at PE 15 (cheap) and others at PE 35 (expensive).
• A single underperforming company can drag down the entire index's earnings, artificially inflating the PE.

As Aswath Damodaran's research on earnings multiples notes, when computing aggregate PE for indices, the elimination of loss-making firms can bias results—requiring careful analysis (source).

Solution: Use indexpe.in for index-level or sector-level decisions, then dig into individual stock fundamentals separately.

2. Predicting Short-Term Price Movements

An index trading above its median PE doesn't mean it will fall tomorrow, next week, or even next month. The market can stay overvalued for years (as it did from 2020-2021) or undervalued for extended periods.

PE ratios reflect long-term valuation, not short-term price action. If you're trying to time the market over days or weeks, indexpe.in won't help.

3. Comparing Across Very Different Eras

The Nifty 50's PE of 22 in 2025 shouldn't be directly compared to its PE of 38 in early 2021 without context. Over those years:

• Interest rates changed (and with them, the "cost of capital" that justifies higher PE multiples)
• The composition of the index evolved (weights shifted)
• GDP growth rates altered
• Corporate earnings and profit margins changed

As Benjamin Graham's methodology and Damodaran's modern extensions demonstrate, PE ratios must be adjusted for interest rate environments and structural changes in the economy (source, source). While median PE provides context, comparing valuations across decades requires deeper analysis. PE ratios alone can't answer: "Is today's 22 PE more reasonable than 2021's 38 PE relative to economic fundamentals?"

4. Growth vs. Mature Markets

Some investors argue that PE ratios have risen structurally over time because markets have become more efficient and growth-oriented. A median PE of 20 from 2004 might not be the "right" baseline for 2025. Damodaran's research on PE and growth demonstrates this relationship empirically (source).

indexpe.in gives you the data, but interpreting whether historical medians are still valid requires judgment and sector expertise.

5. High-Growth or Loss-Making Indices

Some newer indices might be composed of pre-revenue or fast-growth companies. Traditional PE-based valuation doesn't work well here. Startups and growth-stage companies need PEG ratios, revenue multiples, or cash burn analysis—not PE ratios.

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How to Use indexpe.in Effectively

Step 1: Start with the Dashboard

indexpe.in's main dashboard shows you:

• Current PE for 120+ indices
• Median PE (historical baseline)
• Percentage difference from median
• Valuation status (Overvalued/Undervalued/Fairly Valued)

Step 2: Identify Your Interest Areas

• Broad market indices (Nifty 50, Nifty 500) for macro decisions
• Sectoral indices (Bank Nifty, IT Nifty, Auto Nifty, etc.) for sector rotation
• Special indices (Dividend, Midcap, Smallcap, etc.) for thematic investing

Step 3: Ask the Right Questions

Instead of asking, "Should I buy the market?", ask:

• "Where do valuations stand relative to history?"
• "Which sectors are cheaper than their median?"
• "What does the data suggest about risk/reward?"

Step 4: Combine with Other Analysis

indexpe.in is one tool in your toolkit. Pair it with:

• Earnings growth trends: Is the index's earnings growing? If yes, higher PE might be justified.
• Interest rate environment: Lower rates typically support higher PE multiples. Damodaran's research quantifies this relationship (source).
• Economic momentum: Are we heading into recession or boom? Valuations matter more in different phases.
• Geopolitical factors: External shocks can reprice assets regardless of PE.
• Individual company fundamentals: For stock picking, you still need to analyze business quality, cash flow, and competitive moats.

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Historical Context: Why This Matters Now

The chart above illustrates a critical insight from decades of market history: valuations are cyclical. Major market events—the 2008 financial crisis, the 2020-2021 pandemic rally, economic cycles—all leave their fingerprints on PE ratios.

CEIC Data's comprehensive historical analysis of India's Sensex PE shows that valuations ranged from a low of 15.67 in March 2020 (pandemic panic) to a high of 36.21 in February 2021 (post-pandemic euphoria) (source). Understanding these extremes helps investors recognize bubbles and bargains.

As the Morningstar India research on PE ratios concludes: "The historical trend in the P/E ratio of the index provides useful information to investors on the attractiveness of the market" (source).

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The Journey Ahead

indexpe.in started with a simple mission: make valuation data accessible to every investor in India. Today, it tracks 120+ indices in real-time, powered by NSE data. But this is just the beginning.

What's Next?

• Technical analysis overlays: Combining valuation (PE) with price momentum and support/resistance levels
• Earnings forecasts: Integrating analyst projections to calculate forward PE ratios, following the Graham-Dodd framework
• Dividend yield metrics: Understanding how index PE compares to dividend yield for income-focused investors
• Risk metrics: Incorporating volatility, drawdown, and Sharpe ratio alongside valuation
• Portfolio analysis tools: Upload your portfolio and see how your allocations compare to index valuations

indexpe.in is evolving into a comprehensive market valuation platform, but the core principle remains: Data-driven, transparent, accessible valuation analysis for Indian investors.

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Sources

All citations in this article link directly to their sources inline. Below is detailed information about the authoritative references used:

Benjamin Graham Foundation & Value Investing Methodology

Source: Benjamin Graham formula (Wikipedia)
Reference: Cabot Wealth - Benjamin Graham's 7 Criteria for Value Stocks
Key Contribution: Founded PE ratio analysis as core valuation framework (1934)
Link: https://en.wikipedia.org/wiki/Benjamin_Graham_formula

Benjamin Graham & David Dodd - "Security Analysis" (1934)

Source: Graham-Dodd Approach to Value Investing - Historical Analysis
Reference: Graham & Dodd Approach at Value Investing
Key Contribution: Established PE ratio comparison methodology that remains foundation for value investing
Link: https://www.investorsfriend.com/value-investing/

Aswath Damodaran - Earnings Multiples & PE Ratio Analysis

Source: NYU Stern School of Business
Reference: "Earnings Multiples & Valuation" - Investment Valuation Course
Key Contribution: Academic authority on PE ratio drivers, growth relationships, and limitations
Publication: Investment Valuation: Earnings Multiples (Chapters 17-19)
Link: https://pages.stern.nyu.edu/~adamodar/

Aswath Damodaran - Interest Rate & PE Ratio Relationship

Source: NYU Stern - Session 15: PE Ratios
Reference: Damodaran, A. "PE Ratios and Growth"
Key Contribution: Quantifies how interest rates justify different PE multiples across economic cycles
Link: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/earnmult.pdf

Morningstar India - PE Ratio Historical Analysis & Market Cycles

Source: Morningstar India Research
References:

• "How to use the P/E ratio" (2017)
• "How investors can use the P/E ratio" (2016)
• "5 Issues with the P/E Ratio" (2014)
  Key Contribution: Empirical research on Sensex PE cycles, market timing, and historical patterns
  Link: https://www.morningstar.in/

CEIC Data - Historical PE Ratio Database

Source: CEIC Data - India P/E ratio (1988-2025)
Reference: "India P/E ratio, 1988 – 2025"
Key Contribution: Official historical PE data for Sensex, showing range from 15.67 (March 2020) to 36.21 (Feb 2021)
Link: https://www.ceicdata.com/en/indicator/india/pe-ratio

NSE (National Stock Exchange of India)

Source: National Stock Exchange - Index Methodology
Reference: NSE Index PE Calculation & Index Composition
Key Contribution: Official PE calculation methodology and real-time index data
Link: https://www.nseindia.com/

Graham & Dodd Value Investing Framework

Source: Corporate Finance Institute - A Guide to Value Investing
Reference: "Graham's Basic Value Investing Approach"
Key Contribution: Establishes PE ratio within broader fundamental analysis framework
Link: https://corporatefinanceinstitute.com/resources/capital-markets/a-guide-to-value-investing/

PrimeInvestor - Nifty 50 Historical PE Analysis

Source: PrimeInvestor Research & Data Platform
References:

• "Nifty PE Ratio - 20 years worth of powerful, downloadable data"
• "Nifty 50 returns - 20 years historical analysis"
  Key Contribution: 20-year Nifty PE historical dataset and insights on long-term market cycles
  Link: https://primeinvestor.in/nifty-pe-ratio/

Additional Authoritative Resources

Investopedia - PE Ratio Definition

• Source: https://www.investopedia.com/terms/p/price-earningsratio.asp
• Used for foundational PE ratio definitions and calculation methodology

Morningstar Methodology

• Source: https://www.morningstar.in/
• Used for empirical market analysis and PE-based investing frameworks

ClearTax - Indian Finance Education

• Source: https://cleartax.in/s/price-earnings-ratio
• Used for India-specific PE ratio context and explanations

TickerTape - NSE Data Integration

• Source: https://www.tickertape.in/blog/pe-ratio-of-nifty-50-stocks/
• Used for current NSE PE calculations and index-specific analysis

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Final Thoughts

The PE ratio isn't perfect—no single metric is. But it's one of the most durable valuation frameworks because it answers a question every investor grapples with: Am I overpaying?

indexpe.in makes this question answerable for 120+ indices, putting historical context at your fingertips. It won't tell you which specific stocks to buy, or whether the market will crash tomorrow. But it will tell you where valuations stand relative to history—and in investing, that's often exactly what you need.

The goal isn't to time the market perfectly. It's to understand where you are in the valuation cycle, make calibrated decisions, and invest with conviction backed by data.

Benjamin Graham's principle still holds true after nearly a century: "The investor's chief problem—and even his worst enemy—is likely to be himself." Data removes emotion. indexpe.in gives you the data. The conviction must come from you.

Welcome to indexpe.in. Let's invest smarter.

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Appendix: Key Data Points Referenced

Metric	Value	Time Period	Source
Nifty 50 Lowest PE	12.23	Mid-2004	CEIC Data
Nifty 50 Highest PE	40.92	Early 2021	CEIC Data
Nifty 50 Median PE	~20	2004-2025	Morningstar India, PrimeInvestor
Current Nifty PE	22.7	December 2025	NSE
Sensex Lowest PE	15.67	March 2020	CEIC Data
Sensex Highest PE	36.21	February 2021	CEIC Data
Sensex Median PE	18.5-19	Historical Average	Morningstar India
Sensex Overvalued Threshold	21+	Based on median	Morningstar India

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Article created: December 14, 2025
Last updated: December 14, 2025