PE ratio vs future returns: what 27 years of data says
Does buying when the market is cheap actually pay? For every trading day since 1999 we take the Nifty 50's PE ratio and the total return (dividends reinvested) over the following 3 and 5 years. Days are grouped into five equal bands of the index's own PE history, from the cheapest fifth of days to the most expensive fifth, and each band's forward returns are summarized below.
Nifty 50: forward returns by PE band
| PE band | 3Y median | 3Y worst | 3Y positive | 5Y median | 5Y worst | 5Y positive |
|---|---|---|---|---|---|---|
| Cheapest 20% of days (below 17.3) | +28.06% | -1.46% | 100% | +23.56% | +8.80% | 100% |
| 20-40% (17.3 to 20.2) | +12.76% | -9.87% | 94% | +13.18% | +3.68% | 100% |
| 40-60% (20.2 to 21.8) * | +10.12% | -12.34% | 91% | +9.61% | +3.28% | 100% |
| 60-80% (21.8 to 23.9) | +8.06% | -12.39% | 90% | +10.42% | -1.03% | 99% |
| Most expensive 20% (above 23.9) | +14.61% | -15.22% | 92% | +13.40% | -0.04% | 100% |
* today's band. As of 2026-07-17, current PE 20.96. Windows overlap daily and are not independent samples. Past distribution, not a prediction.
How to read this
Bands are quintiles of the index's own history, so "cheap" and "expensive" are always relative to that index, not an absolute PE number. Returns use the Total Returns Index, so dividends are included. Because windows start every trading day, adjacent windows share most of their days; the sample counts overstate statistical independence.
The same analysis is available for every index we track, computed from that index's own history. Open any index page and sign in (free) to see its full band matrix: Nifty Next 50, Nifty Midcap 150, Nifty IT, Nifty Bank or any of the 130 indices on the indices page.