As of early February 2026, India’s benchmark indices, the Sensex and Nifty, have seen their one-year forward price-to-earnings (PE) ratios align with their long-term averages. This normalization contrasts with several global equity markets that continue to trade at elevated valuations compared to historical trends.
Key Highlights
Sensex and Nifty PE Ratios: The Sensex and Nifty are currently trading at one-year forward PE multiples of 20.5x and 20.1x, respectively, aligning closely with their 10-year average levels.
MidCap and SmallCap Indices: The BSE MidCap 150 index is trading at approximately 28x one-year forward PE, slightly above its long-term average of 27.3x. Meanwhile, the BSE SmallCap 250 index remains at a premium, trading at about 23.2x compared to its historical average of 21x.
Global Market Valuations: Major global indices continue to trade at premiums to their long-term averages. For instance, Japan’s Nikkei index is at 23.45x one-year forward PE versus its 10-year average of 18.71x. The S&P 500 and Dow Jones are trading at 21.63x and 21.6x, respectively, compared to their historical averages of 19.25x and 18.3x.
Market Sentiment and Earnings Outlook
The moderation in valuations marks a shift after years of premium trading levels, supported by strong domestic inflows despite foreign investor selling and subdued earnings growth. Analysts caution that index-level valuation metrics should be interpreted carefully, considering evolving index compositions and macroeconomic conditions.
Investors are digesting the Union Budget outcomes alongside the final leg of the earnings season. While corporate results have not delivered major negative surprises, overall earnings momentum remains weak, with growth in the range of 4-5%, reflecting subdued demand conditions. This has kept investor sentiment cautious, particularly in the absence of a strong growth stimulus from the budget.
Implications for Investors
The normalization of valuations in Indian markets suggests a more balanced investment environment. However, the continued premium valuations in global markets indicate potential caution for investors considering international equities. The cautious market sentiment, amid weak earnings and limited fiscal stimulus, underscores the importance of selective investment strategies and close monitoring of macroeconomic indicators.