Courtesy: Kirubakaran Rajendran, Stock Market Trader,Founder - www.squareoff.in

NSE NIfty PE Chart (P/E Ratio) for last 10 years

I have read an post about Nifty PE sometime back in a forum, let me share it here.Below is the Nifty P/E chart for the last 10 years.This is a very important chart for both technical and fundamental analysts. It gives an indication of when to Buy and When to Sell Nifty. Very useful for long term equity investors to time entry and exit in equity markets. P/E chart gives indication of when valuations are cheap and when valuations are peaking. This in-turn gives valuable insight on when to Buy and when to Sell.

You should not judge a stock by its P/E alone, but the Nifty index P/E alone is a pretty conclusive data. Checkout below for proof of that.

Lets analyse the above graph for more insight. All time low of Nifty P/E is 10.68 in 2008 during recession. Belows the Nifty P/E lows or support levels in the last 10 years. These are excellent levels to buy.

Nifty P/E below 13 is a big BUY any-day.

All time high of Nifty P/E is 28.47 in 2000. Belows the Nifty P/E peaks or resistance levels in the last 10 years. These are best levels to SELL. Nifty P/E above 24 is a big SELL any-day.

Current Nifty PE Ratio on 11-Nov-2016 is 22.02

Nifty PE ratio measures the average PE ratio of the Nifty 50 companies covered by the Nifty Index. PE ratio is also known as "price multiple" or "earnings multiple". If P/E is 15, it means Nifty is 15 times its earnings. Nifty is considered to be in oversold range when Nifty PE value is below 14 and it's considered to be in overvalued range when Nifty PE is near or above 22. The market quickly bounces back from the oversold region because intelligent investors start buying stocks looking to snatch up bargains and they do the exact opposite when Nifty P/E is in the overbought region.

Recent research done by my firm shows just how dangerous it is to remain invested in an expensive market. Since NSE started, every time when Nifty's Price/Earnings ratio exceeded 22, the average return from Indian equities over the subsequent three years became negative.

so the picture you mentioned in the question is really valid.

Happy Investing!