Nifty Valuation Tracker Series: June 2026 Update – Broad Market and Smart Beta Indices 04Jul2026
(This is my 523rd blog since 2010. Over the years, I have covered global financial markets, with a focus on India, and continue to share insights to help readers understand complex topics in simple language.
The views expressed here are for information purposes only and should not be construed as a recommendation or investment advice. While the author is a CFA Charterholder with nearly 25 years of experience in financial markets, this content is intended to share general insights and does not constitute financial guidance.
Please consult your financial adviser before taking any investment decision. Safe to assume the author has a vested interest in stocks / investments discussed if any.)
Introduction
Every investor wants to know whether the market is expensive or inexpensive. There is no perfect answer. However, comparing today's valuations with their own history provides a useful starting point.
This blog is the third part of the updated valuation framework for select NSE indices numbering six, building on earlier studies published:
1) On 21Apr2026 namely “How Valuations Shape Returns and Risk in Select NSE Indices,”
2) On 03May2026 namely “Valuation Changes in Broad Market and Smart Beta Nifty Indices," and
3) On 31May2026 namely "Nifty Valuation Tracker Series: May 2026 Update – Broad Market and Smart Beta Indices"
This section focuses on current valuation positioning within a
historical range. Summary data of all six Nifty indices are included as 'Additional data' at the end of the blog for ready reference of readers.
The analysis compares current levels (as of
30Jun2026) against a 22-quarter baseline from Mar2021 to Jun2026 across
six Nifty indices.
It uses percentile-based positioning of PE, PB and dividend yield to assess whether valuations are relatively rich or attractive across segments.
It is not a prediction of future market returns. It is simply a framework to understand where valuations stand today. This is not investment advice.
Note: The idea is to update this
22-quarter framework each quarter as new data become available. For
example, inclusion of the Jul-Sep2026 quarter will extend the dataset to
23 quarters in the next update, maintaining a rolling historical
reference.
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Related blogs:
"Nifty Valuation Tracker Series: May 2026 Update – Broad Market and Smart Beta Indices" 31May2026
“Valuation Changes in Broad Market and Smart Beta Nifty Indices” 03May2026
“How Valuations Shape Returns and Risk in Select NSE Indices” 21Apr2026
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1 Why valuations matter
Valuations tell us how much investors are willing to pay for a company's earnings or assets.
A lower valuation does not guarantee better future returns. An expensive market can become even more expensive. Likewise, a cheap market can become cheaper.
Even so, valuations often help investors judge whether optimism or caution is already reflected in prices.
About this study:
The study covers the period from Mar2021 to Jun2026, a total of 22 quarters.
The analysis starts from Mar2021 because the method used to calculate Nifty 50 earnings per share changed at that point. Using only the newer data makes the historical comparisons consistent.
The study covers six selected Nifty indices. It is not a comprehensive study of the Indian equity market.
How to read the numbers:
Three valuation measures are used.
PE ratio compares price with earnings per share (EPS).
PB ratio compares price with book value.
Dividend yield usually moves in the opposite direction to valuations. A higher dividend yield often indicates a lower valuation.
The charts also show where the current valuation lies within its own historical range. A reading below the 25th percentile suggests valuations are relatively low compared with the past 22 quarters. A reading above the 75th percentile suggests valuations are relatively high.
No single measure should be used on its own. Looking at all three provides a more balanced picture.
Data note: The valuation measures are taken from Nifty Indices data. PE and PB ratios may not be updated at the same frequency because they depend on different underlying data.
Readers should therefore view the three measures as broad indicators rather than precise real-time measures.
Charts showing current valuation (Jun2026) versus historical range (22 quarter data from Mar2021 to Jun2026) of six select Nifty indices >
Click on the charts to view better >
2 What do the current valuations say?
Among the broad market indices, Nifty 50 appears the least expensive. Both its PE and PB ratios are below the 25th percentile of their historical ranges. Dividend yield is also close to its historical median.
In fact, for Nifty 50, 1-year return (-5.4%), 3-year annualised return (8.8%) and 5-year annualised return (10%) are the lowest in the past 22 quarters.
Nifty Midcap 150 sends mixed signals. Its PE ratio is below the historical median, suggesting reasonable valuations. However, its PB ratio is above the 75th percentile, indicating investors continue to pay a premium for net assets.
Dividend yield for Nifty Midcap 150, at 0.66 per cent, is the lowest since Mar2021.
Nifty Smallcap 250 remains the most expensive broad market segment. Its PE ratio is above the 75th percentile, while its PB ratio is close to that level. Investors continue to place a high valuation on smaller companies.
Among the so-called smart beta indices, Nifty 100 Low Volatility 30 looks relatively inexpensive. Its PE ratio is below the 25th percentile and its PB ratio is at the lowest level seen during the study period. Its 3-year and 5-year returns are the lowest in the past 22 quarters.
Nifty 200 Momentum 30 still trades at relatively rich valuations. Both PE and PB ratios remain above their historical median.
Nifty 200 Quality 30 is somewhere in between. Its PE ratio is close to the 25th percentile, while its PB ratio is near its historical median.
Dividend yield: A point worth noting
Dividend yields declined across all six Nifty indices during the Jun2026 quarter (except momentum). This may reflect a combination of rising share prices and changing corporate payout policies. Many companies have increasingly used share buybacks alongside, or instead of, larger cash dividends.
Readers interested in the subject may refer to my earlier article (Why Share Buybacks Are Making A Comeback In India 22Jun2026 ) on the growing use of share buybacks.
3 What changed during the June 2026 quarter?
Valuations moved differently across the market.
Nifty 50 became modestly more expensive, mainly because its PE ratio increased.
Mid-cap stocks became slightly cheaper on a PE basis but more expensive on a PB basis.
Small-cap stocks experienced the largest increase in valuations, with both PE and PB ratios rising sharply.
Low Volatility became marginally cheaper.
Momentum became noticeably more expensive.
Quality changed very little during the quarter.
These changes remind us that different parts of the market can move in very different ways, even over a single quarter.
Chart showing valuation changes in six Nifty indices between end-Mar2026 and end-Jun2026 >
Click on the chart to view better >
4 Looking beyond valuations
Valuations are only one part of the investment picture.
The table below adds historical returns and volatility for the same six indices. This provides useful context.
Midcaps, smallcaps and the Momentum index produced the highest historical returns over one, three and five years. However, they also experienced much higher volatility.
Low Volatility delivered the lowest volatility while still generating competitive long-term returns.
Quality offered returns similar to Nifty 50 but generally traded at much higher valuation multiples, reflecting investors' willingness to pay more for companies with stronger fundamentals.
Nifty 50 delivered lower returns than midcaps and momentum over this period, but with considerably lower volatility.
The broad pattern is familiar. Higher returns have generally come with higher risk.
It is important not to interpret these numbers as proof that higher valuations produce higher returns. They simply describe the experience of these six indices during the study period.
Chart showing cross index valuation, risk and return (only median values) >
22 Quarters data from Mar2021 to Jun2026 >
5 What can investors learn?
Current valuations suggest the large-cap segment is relatively inexpensive compared with its own recent history.
Smallcaps continue to trade at premium valuations.
Midcaps remain somewhere in between.
Among the smart beta indices, Low Volatility appears reasonably valued, Momentum remains expensive and Quality continues to command a premium despite a recent moderation in valuations.
These observations should not be viewed as buy or sell signals. They simply show where each index stands relative to its own history.
6 Shortcomings
This analysis has several limitations.
It covers only six selected Nifty indices.
The historical period is limited to 22 quarters because of the change in Nifty 50 earnings calculations before Mar2021.
The study focuses only on valuations. It does not consider earnings growth, interest rates, liquidity, macroeconomic conditions or investor sentiment.
7 Closing thoughts
Valuations are best viewed as a compass rather than a forecast.
They help investors understand where the market stands today, but they cannot predict where the market will go next.
Used alongside earnings, economic data and an investor's own objectives, valuation measures can provide a useful guide to long-term market positioning.
Check below for references and additional notes.
- - -
Tweet 22Apr2025 Bizarre spike in valuation ratios (PE, PB and dividend yield) of Nifty 200 Momentum 30 index on 31Dec2024 vs previous day)
Tweet 03Jun2021 - Nifty 50 PE calculation method change wef 31Mar2021
Tweet 01May2024 - Don't compare Nifty PE ratios on or after 31Mar2021 with those in prior periods
Tweet 07Jul2024 - NSE press release on change in Nifty 50 PE calculation method
Nifty Indices factsheets
NSE Index Dashboard monthly - PDF for Jun2026
NSE Live Analysis - NSE Index performance daily - showing index values and valuation ratios of all Nifty Indices / NSE Indices on a daily basis
NSE Historical Index yield - Find out daily valuation ratios (PB, PE and dividend yield) of all Nifty indices / NSE indices (dropdown menu)
NSE Market Watch - all indices
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Read more on passive equity funds and factor investing:
Top 10 Equity Indices Powering Passive Investing in India: Big-Picture View 29Jan2026 (Big picture view of Passive Equity Funds - passive funds)
NSE's Backtesting Claims Child Indices Beat Parent Indices - But Does It Hold in Real World? 09Dec2025 (incl calendar year returns of Nifty 50, Nifty Midcap 150 and the so-called smart beta indices) (NSE Indices / Nifty Indices)
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