Low PE Ratio Stocks in India: Meaning, Features & Benefits

As an investor, understanding the essential financial ratios is important for making informed decisions. One frequently utilised metric to assess a stock’s worth is the price-to-earnings (PE) ratio. The PE ratio in India serves as a popular measure for evaluating the relative value of a company’s stock by comparing its current stock price to its earnings per share (EPS). In this discussion, we will define low PE ratio stocks and outline strategies for identifying them. Let’s get started.

List of the Best Low PE Ratio Stocks in India 

Here is a list of the top Low PE Ratio Stocks in Nifty 50:

Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.

Note: The data on this list of the lowest PE ratio stocks Nifty 50 is dynamic and subject to real-time changes.  This data was derived from the Tickertape Stocks Screener on 12th December 2024 using the following parameters:

• Stock Universe: Nifty 50
• PE Ratio: Set to Low – Sort from lowest to highest

🚀 Pro Tip: You can use Tickertape’s Stock Screener to research and evaluate stocks with over 200+ filters and parameters.

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Brief Overview of Low PE Ratio Companies

Here is a brief overview of the top companies in Nifty 50 that have low PE ratio stocks in India on the Nifty PE ratio chart:

Tata Steel Ltd

Tata Steel Limited, formerly Tata Iron and Steel Company Limited (TISCo), was founded on 26th August 1907 in Jamshedpur, Jharkhand, India, by Jamsetji Tata. The company began its journey with steel production and has since grown to become one of the leading steel manufacturers worldwide. It is recognised as one of the lowest-cost producers of steel globally. As of 12th December 2024, the company had a market capitalisation of Rs. 1,87,652.45 cr., and its share price closed at Rs. 150.78. The company has a low current Nifty PE ratio of -42.29, making it one of the lowest PE ratio stocks in India 2024 from the Nifty 50.

Bharat Petroleum Corporation Ltd

Bharat Petroleum Corporation Limited (BPCL), a ‘Maharatna’ and Fortune Global 500 company, was originally incorporated as Burmah Shell Refineries Limited on 3rd November 1952. Headquartered in Mumbai, Maharashtra, it became Bharat Refineries Limited on 24th January 1976, when it acquired the entire ownership of Burmah Shell’s interests. It was later renamed BPCL. Over the last 5 years, the company’s net income has grown at a yearly rate of 28.05%, higher than the industry average of 17.55. The PE ratio of Nifty 50 stock is 4.90, thereby making it one of the lowest P/E ratio stocks in india from Nifty 50,

Oil and Natural Gas Corporation Ltd

Oil and Natural Gas Corporation (ONGC) is India’s largest producer of crude oil and natural gas. Established by the Indian government on 14th August 1956, ONGC was created to boost the country’s crude oil production, focusing mainly on oil exploration. It is one of the low PE stocks in Nifty 50. Over the last 5 years, the company’s debt-to-equity ratio has been 48.95%, lower than the industry average of 49.36%. As of 12th December 2024, the company had a market capitalisation of Rs. 3,23,187.37 cr., and its share price closed at Rs. 254.05. Furthermore, the company has a low PE ratio of 6.57.

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. Headquartered in Kolkata, CIL is the world’s largest government-owned coal producer and the 9th largest employer in India, with around 2,72,000 employees. As of 12th December 2024, Coal India Ltd had a market capitalisation of Rs. 2,55,167.77 cr., and its share price closed at Rs. 409.10. The company also has a low nifty PE ratio today of 6.82, making it one of the lowest PE ratio stocks in Nifty 50. 

Indusind Bank Ltd

IndusInd Bank, established in 1994, is a leading financial services bank in India. Its name, inspired by the Indus Valley Civilisation, reflects its commitment to innovation and robust business practices. Since launching its IPO in 1997, the bank has grown steadily, providing high-quality banking services to over 35 million customers, including individuals, large corporations, government entities, and public sector undertakings (PSUs). As of 12th December 2024, Indusind Bank Ltd had a market capitalisation of Rs. 76,681.29 cr., and its share price closed at Rs. 997.95. Furthermore, the Nifty 50 company had a PE ratio of 8.54.

Tata Motors Ltd

Tata Motors Limited, established in 1945 as Tata Locomotive and Engineering Company Limited, was renamed in 2003. As a global automaker, Tata Motors produces a wide range of passenger, commercial, and electric vehicles. The company plays a key role in driving India’s transition to electric vehicles, maintaining a strong presence in the rapidly evolving automotive sector. As of 12th December 2024, Tata Motors Ltd had a market capitalisation of Rs. 2,94,453.18 cr., and its share price closed at Rs. 786.35. Additionally, the company had a PE ratio of 9.38. 

State Bank of India

State Bank of India (SBI), established on 1st July 1955, is a major public sector bank and financial services provider in India. With its headquarters in Mumbai, SBI holds a significant presence in the Indian banking sector, capturing a quarter of the market and serving over 480 million customers. As of 12th December 2024, State Bank of India had a market capitalisation of Rs. 7,74,210.79 cr., and its share price closed at Rs. 853.70. Additionally, the company had a PE ratio of 11.54. 

Axis Bank Ltd

Axis Bank, established in 1994, is one of India’s first new-generation private sector banks. The bank was promoted in 1993 through a joint initiative by the Specified Undertaking of the Unit Trust of India (SUUTI), General Insurance Corporation of India (GIC), Life Insurance Corporation of India (LIC), and several other major insurance companies, including The New India Assurance Company, National Insurance Company, United India Insurance Company, and The Oriental Insurance Company. As of 12th December 2024, Axis Bank Ltd had a market capitalisation of Rs. 3,57,011.49 cr., and its share price closed at Rs. 1,145.65. Additionally, the company had a Nifty 50 PE ratio of 13.53. 

Hindalco Industries Ltd

Aditya Birla Group founded Hindustan Aluminium Corporation Limited in 1958. By 1962, the company began operations in Renukoot, Uttar Pradesh, with an annual capacity of 20,000 tonnes of aluminium metal and 40,000 tonnes of alumina. In 1967, a captive thermal power plant was also set up at Renusagar to support these operations. Hindalco’s rise to prominence in the aluminium industry is credited to the visionary leadership of the late Aditya Vikram Birla. As of 12th December 2024, Hindalco Industries Ltd had a market capitalisation of Rs. 1,49,564.57 cr., and its share price closed at Rs. 668.70. Additionally, the company had a PE ratio of 14.73. 

Shriram Finance Ltd

Shriram Finance, one of India’s largest retail Non-Banking Financial Companies (NBFCs), provides a wide range of credit solutions, including loans for commercial vehicles, two-wheelers, cars, homes, gold, personal needs, and small businesses. As of 12th December 2024, Shriram Finance Ltd had a market capitalisation of Rs. 1,19,831.13 cr., and its share price closed at Rs. 3,248.10. Additionally, the company had a PE ratio of 16.27. Over the last 5 years, the company’s revenue has grown at a yearly rate of 18.54%, higher than the industry average of 14.67%, and its market share increased from 12.57% to 16.03%.

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What is a PE Ratio? 

PE in stock market India stands for price-to-earnings ratio. It is a widely used valuation ratio that helps to determine the relative value of a company’s stock. While a high PE ratio in high PE stocks means that a company is potentially more expensive relative to its earnings, it may also suggest that the company has strong growth potential. Therefore, comparing companies with low p/e ratio can also help you to identify undervalued opportunities within the same industry.

The P/E ratio helps investors assess a company’s performance over time, comparing it with its historical data and against other companies or market indices. It can be evaluated either based on past performance or future expectations.

In practical terms, the P/E ratio allows you to:

• Compare a company’s current financial performance with its past results.
• Measure a company’s performance against competitors in the same sector.
• Evaluate the performance of a benchmark index over time.
• Contrast the performance of one benchmark index with others.

Additional Details on PE Ratio

The P/E ratio, also known as the price or earnings multiple, varies across different contexts:

• NSE P/E Ratio: This ratio differs among indices like Nifty 50 and Bank Nifty. Regular monitoring helps gauge the market’s valuation relative to individual stocks.
• Industry P/E Ratio: Different industries have varying P/E ratios. For instance, tech companies often have higher ratios due to their growth prospects, while utilities usually have lower ratios because of their stable earnings. Comparing a stock’s P/E ratio with industry peers can indicate if it is undervalued.
• Negative P/E Ratio: A negative P/E ratio signals that a company is unprofitable. This requires further investigation before considering the stock as a potential investment.

What are Low PE Ratio Stocks?

A low PE ratio is a valuation metric that indicates a stock’s price is low relative to its earnings. Generally, one may consider low PE ratio stocks as undervalued. Thus, identifying low PE ratio stocks is important because it can help you find undervalued companies. As these stocks with low PE ratio companies may have strong growth potential and generate higher returns in the long run. The shares with low PE ratio may also offer a margin of safety in case of adverse market conditions.

Why Invest in Low PE Stocks in India?

A lower PE ratio indicates an attractively priced stock, while a higher PE ratio suggests a relatively expensive or overvalued stock. When considering investments in low PE ratio stocks in India, it’s crucial to compare the PE ratio with those of peer companies and check the industry’s average PE ratio.

Invest in low PE stocks in India only when the company’s fundamentals are robust and the potential for future growth can be observed.

How to Calculate Low PE Ratio Shares? 

Calculating a low PE ratio involves comparing a stock’s PE ratio to the average PE ratio of the stock market or sector. Here’s how you can calculate.

• Determine the Market or Sector Average PE Ratio: Find the average PE ratio of the market or sector that the stock belongs to. The average PE ratio can be found through financial news sources or online stock screeners.
• Calculate the Stock’s PE Ratio: Divide the low stock’s current market price per share by its earning ratio per share (EPS) over the last 12 months. The formula for calculating the PE ratio is as follows:

• 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. This means low-PE stocks in India in Nifty 50 have a low PE ratio.

Strategies For Identifying Low PE Ratio Stocks 

Here are some strategies for identifying low PE ratio stocks:

• Use Stock Screeners: Online stock screeners allow you to filter and sort low PE ratio stocks based on various metrics, including PE ratio. These screeners can be a quick and easy way to identify low PE high growth stocks or the best PE ratio shares.
• Analyse Company Financial Statements: You can examine a company’s financial statements, such as its balance sheet and income statement, to calculate its PE ratio. This can help you to identify low PE ratio shares or good PE ratio stocks.
• Look for Undervalued Stocks: You can use fundamental analysis and other valuation metrics to identify undervalued low PE stocks India.
• Consider Investing in Index Funds or ETFs: Index funds and ETFs provide access to a diversified portfolio of stocks with low price-to-earnings (PE) ratios. For instance, certain ETFs follow the Nifty Low Volatility 50 Index, which comprises 50 low-volatility stocks with modest and current PE ratios. This index includes some public sector undertaking (PSU) stocks that also have low PE ratios.

However, investors must do their own research and/or consult their financial advisor before investing.

Who Should Invest in Low PE Stocks?

Choosing a company with the lowest pe ratio shares solely based on a lower ratio may not always be the best decision. Some investors argue that purchasing a stock with a lower ratio is advantageous because you pay less for each rupee of earnings. However, it’s important to do your own research or consult a financial advisor before investing.

Features of Low PE Stocks in India

The best PE ratio stocks in India exhibit distinct characteristics that investors should be aware of for informed decision-making.

• Value Proposition: Low PE ratio stocks often represent companies trading at a lower valuation relative to their earnings. This can signify potential opportunities for value investors seeking assets priced below their intrinsic value for whom low PE high growth stocks might be attractive.
• Risk and Volatility: Low PE ratio stocks can present opportunities but may also come with higher risk and volatility. Investors should carefully assess the low PE high growth stocks’ risk tolerance and consider the potential for fluctuations in stock prices.
• Market Sentiment and Perception: Low PE ratios may reflect a company’s market sentiment and perception. Understanding the reasons behind a low PE ratio, such as temporary challenges or industry trends, is crucial for a comprehensive analysis.

• Dividend Yields: Some low PE ratio stocks may offer attractive dividend yields. Those who are looking for income-generating investments can consider the dividend history and policies of these low PE ratio stocks.
• Sector Dynamics: The characteristics of low PE ratio stocks can vary across sectors. Analysing the broader economic and industry trends is essential to contextualising the significance of a lower PE ratio of stocks within a specific industry.

Why are Low PE Ratio Shares Popular? 

Let’s look at the various reasons that can make low PE stocks in India an attractive investment option.

Potential for High Returns

Low PE stocks in India may be undervalued by the market, indicating that their current price may not represent their intrinsic worth. If the market eventually acknowledges the true value of these lower PE ratio stocks, you could potentially achieve higher returns on your investment.

Low Risk

Another advantage could be the low risk level. This is because you are paying less for each dollar of earnings generated by the company, which can provide a margin of safety if the company faces challenges or headwinds.

Attractive Valuation

Low PE ratio stocks can be an attractive valuation opportunity. Low PE stocks in India can indicate that the stock is trading at a discount relative to its peers or the broader market, making it an attractive purchase opportunity.

Favourable Market Conditions

Low PE ratio stocks can thrive during times of market volatility or economic instability. Therefore, you might opt for low PE stocks in India as a conservative approach during unpredictable times.

Diversification

Including low PE ratio stocks or trailing low PE stocks in a diversified portfolio can help spread risks and potentially enhance returns. Thus, by portfolio investing, you get a mix of high and low PE ratio stocks, balance your portfolio and potentially achieve better overall returns.

Example of Low PE Ratio Shares

Suppose two low P/E ratio stocks in India operate in the same industry with similar financials and market capitalisations. Company A has a PE ratio of 10, and Company B has a PE ratio of 20. This means that Company A’s stock price is Rs. 10 for every Rs. 1 of earnings, while Company B’s stock price is Rs. 20 for every Rs. 1.

In this scenario, Company A is said to have a low PE ratio compared to Company B. Thus, this suggests that the market is undervaluing Company A’s earnings potential, which can be an attractive buying opportunity. On the other hand, Company B may be overvalued, and you may want to exercise caution before investing in the stock.

Remember, low PE PSU stocks don’t automatically indicate an undervalued stock or a solid investment opportunity. It’s essential to thoroughly research and assess a company’s financial stability, leadership team, future growth potential, and prevailing market conditions before deciding to invest in even the best PE ratio stocks NSE.

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To Wrap It Up…

Stocks with low PE ratios are often considered undervalued and may offer strong returns. However, relying solely on the PE ratio for investment decisions is not advisable. It’s important to assess a company’s financial health, industry-specific PE ratios, and other fundamental indicators. Additionally, investing in low PE ratio stocks carries risks such as market fluctuations and potential losses. To mitigate these risks, consider diversifying your portfolio. At last, don’t forget to consult your financial advisor before making investment decisions.

Frequently Asked Questions About Low PE Ratio Stocks