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 study 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23 quarters in the next update, maintaining a rolling historical
reference.
(article continues below)
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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, three broad and three "smart beta" indices. It is not a comprehensive study of the Indian equity market.
Indices covered are:
Nifty 50,
Nifty Midcap 150,
Nifty Smallcap 250,
Nifty 100 Low Volatility 30,
Nifty 200 Momentum 30, and
Nifty 200 Quality 30.
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 and dividend yield 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?
Broader Indices:
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.
Contrast between Nifty 50 and Nifty Midcap 150
One could add Nifty 50 is cheap for a reason, its implied earnings contribution during 31Mar2026-30Jun2026 is just 2.5 per cent. This is way lower than implied earnings contribution of 22.1 per cent for Nifty Midcap 150 during the same period.
That is a genuine earnings-led move in Midcap index, not a sentiment one (Check Section 3, with Chart showing PE and PB Expansion versus Index Returns from 31Mar2026 to 30Jun2026 for data).
Smart Beta Indices:
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 >
Caveat: Valuation Changes (see chart immediately above) Are Not Directly Comparable Across All Indices for the period Mar2026 through Jun2026:
Nifty 50: No rebalance occurred between Mar2026 and Jun2026, so the valuation changes, in PE, PB and dividend yield, largely reflect genuine market re-rating of substantially the same large-cap stocks.
Nifty Midcap 150: Also not rebalanced during the period, making the changes mostly representative of how the same mid-cap universe was repriced by the market.
Nifty Smallcap 250: Likewise, no rebalance took place. The sharp rise in PE therefore mainly reflects significant valuation expansion within the existing small-cap universe.
Nifty 100 Low Volatility 30: Quarterly rebalancing in Jun2026 means the valuation changes reflect both market movements and changes in constituents and weights, reducing comparability with Mar2026.
Nifty 200 Momentum 30: The Jun2026 semi-annual rebalance replaced 22 of the 30 stocks (73% turnover) in the index, resulting in major constituent turnover.
The Mar2026 and Jun2026 indices therefore represent substantially different portfolios, so changes in PE, PB and dividend yield largely reflect portfolio reconstitution rather than pure market re-rating.
Nifty 200 Quality 30: The Jun2026 semi-annual rebalance replaced only one of the 30 stocks (3% turnover). Unlike Momentum 30, the Mar2026 and Jun2026 portfolios remained almost identical, making the valuation changes broadly comparable and largely reflective of market re-pricing rather than constituent turnover.
Overall: For the three broad market indices the March to June change is a clean valuation signal. For Low Volatility, Momentum and Quality, it mixes repricing with constituent change, so treat those comparisons with more care.
PE and PB Expansion vs Index Returns:
The chart below shows, for the period Mar2026 through Jun2026, the TRI (total return index) change, trailing PE and PB changes.
From the data, readers can discern the implied earnings contribution of an index. For example, one could interpret the excess of 7.4% index change over trailing PE change of 4.9% as earnings component (2.5% = 7.4% - 4.9%).
In the case of Nifty Smallcap 250, PE has expanded much faster than earnings growth.
One could say:
Earnings Component ≈ Price Return − Multiple Expansion.
Chart showing PE and PB Expansion versus Index Returns (31Mar2026 – 30Jun2026) >
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 since 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.
(The author made some alterations on 05Jul2026, like, including the PE / PB expansion chart in section 3 above)
- - -
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Additional data:
Data note: The valuation measures come from Nifty Indices. PE, PB and dividend yield may not update at the same frequency, because each depends on different underlying data.
The author's best guess is:
PE ratios update more often, because NSE India / Nifty Indices appear to refresh EPS as companies declare quarterly and annual results.
In contrast, PB ratios update less often, because book value is reported half-yearly and yearly, not every quarter for all listed companies in India. It's possible NSE India may be updating book values based on published fiscal year (annual reports) data.
Dividend yield updates with price daily and with the declared dividend when companies announce it, so its rhythm differs again.
Index rebalancing frequency is as follows:
It is semi annual (March and September) for:
Nifty 50,
Nifty Midcap 150, and
Nifty Smallcap 250,
For, Nifty 100 Low Volatility 30, it is quarterly (March, June, September, December).
For Nifty 200 Momentum 30 index, it is semi annual (June, December).
For Nifty 200 Quality 30 too, it's semi annual (June, December).
Notes on index weighting:
Nifty 100 Low Volatility 30 index's 'score' weighting is based on inverse of stock's volatility (standard deviation).
Nifty 200 Momentum 30 index's 'tilt' weighting is calculated as stock free float market cap multiplied by its momentum score.
Nifty 200 Quality 30 index's 'tilt' weighting is computed as stock free float market cap multiplied by its quality score.
Chart showing Index Characteristics of six Nifty indices >
Summary tables for all six indices. Readers may check the data for their own benefit >
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References:
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 (NSE press release dated 23Feb2021 -- EPS used in PE calcualtion was based on standalone finanacials; from Mar2021, it is based on consolidated basis)
Screenshot of the above >
Nifty Indices factsheets
Nifty 50
Nifty Midcap 150
Nifty Smallcap 250
Nifty 100 Low Volatility 30
Nifty 200 Momentum 30
Nifty 200 Quality 30
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
Nifty Indices Index Methodology - Jun2026 PDF for equity indices
Excel file: NSE Indices Valuation 30Jun26
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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)
The Next Generation of Market Leaders: A Fresh Look at Nifty Next 50's Corporate Landscape 15Jan2026 (NSE Indices / Nifty Indices) 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)
Factor Investing in India: Do "Smart Beta" Indices Outsmart Nifty 50 and Midcap 150? 24Nov2025 (incl trailing returns; calendar year returns of Nifty 50, Nifty Midcap 150 and the so-called smart beta indices) (NSE Indices / Nifty Indices)
