Best Low PE Ratio Stocks in India

What is a PE Ratio?

The price-to-earnings (PE) ratio is a widely used metric that compares a company’s current share price to its earnings per share (EPS). It serves as an indicator of how the market values the company’s earnings. A high PE ratio may suggest that investors expect strong future growth, even if the stock appears expensive relative to its current earnings. Conversely, a low P/E ratio could indicate that a stock is undervalued, particularly when compared to its peers in the same industry or sector.

What are Low PE Ratio Stocks?

them as potentially undervalued, especially when compared to other companies in the same sector. These stocks can offer opportunities for long-term growth and may carry less downside risk during market volatility. Identifying low P/E stocks can help investors find companies that are overlooked or trading below their intrinsic value, while also offering a possible margin of safety.

About the Low PE Ratio Companies

1. Tata Steel Ltd: Tata Steel Limited, formerly Tata Iron and Steel Company Limited (TISCo) is recognised as one of the lowest-cost producers of steel globally. 
2. Bharat Petroleum Corporation Ltd: Bharat Petroleum Corporation Limited (BPCL) is a ‘Maharatna’ and a Fortune Global 500 company. 
3. Oil and Natural Gas Corporation Ltd: Oil and Natural Gas Corporation (ONGC) is India’s largest producer of crude oil and natural gas. 
4. Coal India Ltd: Coal India Limited (CIL), established on 1st November 1975, is a major central public sector enterprise under the Ministry of Coal, Government of India.
5. Indusind Bank Ltd: IndusInd Bank, established in 1994, is a leading financial services bank in India. The bank has grown steadily.

How to Invest in Low PE Ratio Stocks?

Here is how one can invest in low PE ratio stocks in NSE in India:

1. Open a demat/trading/stockbroker account. You can open a demat account with smallcase!
2. Conduct thorough research into the Indian low PE ratio stocks that are of interest to you. Investors can use tools like the Tickertape Stock Screener to do this. The screener offers 200+ built-in filters to choose from, and investors can choose the parameters to research. 
3. Place a ‘Buy’ Order on the low PE ratio stocks of your choosing.

How to Calculate Low PE Ratio Shares?

Here’s how you can calculate the PE ratio of stocks.

• Compare the Low PE ratio Share: A stock may be considered to have a low PE ratio if its PE ratio is lower than the industry average.

For example, if the average PE ratio of the Nifty 50 index is 25 and a stock has a current market price of Rs. 50 per share and an EPS of Rs. 5, its PE ratio would be 10 since this is lower than the average PE ratio of the Nifty 50.

Benefits of Low PE Ratio Stocks

• Indicates potential undervaluation: A low price-to-earnings (PE) ratio often signals that a stock is trading below its intrinsic value, suggesting potential for upward price correction in the top low PE ratio shares India.
• Opportunities in overlooked sectors: In India, cyclical industries such as manufacturing, infrastructure, or public sector enterprises may show low PE ratios during downturns but recover as the cycle turns.
• Potential for long-term gains: If the company’s fundamentals remain intact, low PE stocks with the lowest PE ratios may deliver superior returns once earnings visibility improves or investor sentiment shifts.
• Appeals to value-oriented strategies: Low price to earnings stocks or the best stock with low PE ratio often align with value investing approaches, which are historically successful in Indian markets over the long term.

Risks of Investing in Low PE Ratio Stocks

• May reflect deeper business problems: A low PE ratio may indicate poor earnings quality, management challenges, or weakening demand for the company’s products or services.
• Risk of value traps: Some low PE stocks and penny stocks with low PE ratios may remain undervalued for long periods or continue declining if earnings do not recover as expected.
• Market sentiment may stay negative: Even fundamentally sound companies can trade at low PE ratios if the broader market perceives them as risky or unattractive.
• PE ratio alone is not sufficient: Relying solely on PE without analysing other factors such as debt levels, cash flows, and industry trends can lead to misleading conclusions.

Factors to Consider When Investing in Low PE Ratio Stocks

• Industry context: PE ratios vary across sectors; comparing within the same industry gives clearer insights.
• Earnings quality: One-time gains or accounting changes can distort earnings and affect the PE ratio.
• Growth outlook: A low PE may reflect limited future growth or business stagnation.
• Debt burden: High debt levels can lead to lower valuations due to financial risk.
• Market sentiment: Negative news or sentiment can temporarily push down a stock’s PE ratio.