Valuation Changes in Broad Market and Smart Beta Nifty Indices 03May2026
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(Updates 09May2026 and 09May2026 with latest valuation changes are available at the end of the blog)
This new article updates the earlier 21-quarter valuation framework with monthly data through Apr2026, placing current conditions in a longer historical context for select broad market and "smart beta" Nifty indices.
Check previous blog: How Valuations Shape Returns and Risk in Select NSE Indices 21Apr2026
This table presents the 21-quarter (Mar2021–Mar2026) median-based valuation, risk and return framework across the same six Nifty indices, serving as the historical reference distribution (median and percentile ranges) for interpreting recent market movements.
Table 1 showing cross-index valuation, risk and return snapshot (all median
values: 21 quarters data from Mar2021 to Mar2026) >
The latest April 2026 readings are now compared against this framework to assess their position within historical ranges across indices.
For instance, Nifty 50 valuations are currently (as of 30Apr2026) below their historical median (50th percentile), while Nifty Midcap 150 and Smallcap 250 are above it. All three smart beta indices are also trading above their respective historical medians, indicating relatively richer factor valuations versus long-term median values.
Past one month trend
Between March and April 2026, valuations rose across most segments, with higher PE and PB and lower dividend yields.
The table 2 below summarises these changes and helps position current valuations within historical ranges rather than as standalone signals.
Table 2: Valuation changes in broad & smart beta Nifty indices (between Mar-Apr2026) >
Please
note: Current valuation ratios of each index can be compared with
historical distribution to assess whether valuations are in the upper or
lower quartile relative to history (the full data are shown in my previous blog, use "Summary data" table of 21 quarters for period from Mar2021 to Mar2026 for each of the six NSE Indices discussed in the blog).
Overall trend:
This update extends the earlier 21-quarter valuation framework by adding the latest monthly data (Mar2026 vs Apr2026), allowing readers to place current market conditions within historical context.
Across indices, valuations moved higher in April, with PE and PB expanding and dividend yields easing. This confirms a broad-based re-rating driven by stronger risk appetite during Apr2026, after five weeks of selling post-Iran war.
Broad market indices:
Large caps (Nifty 50) saw a moderate valuation uptick, with PE rising from 19.6 to 20.9 and PB from 3.1 to 3.3, reflecting steady institutional participation rather than aggressive re-rating.
Midcaps showed stronger expansion, with PE moving from 30.6 to 33.5 and PB from 4.2 to 4.7, indicating continued preference for growth segments.
Smallcaps led the move, with PE jumping from 25.9 to 30.0 and PB from 3.0 to 3.5, reinforcing heightened risk-on positioning and faster valuation expansion at the lower end of the market.
Smart beta indices:
Factor indices displayed clearer behavioural patterns. Momentum, as can be expected, showed a strong uptick, with Nifty 200 Momentum 30 PE rising from 23.2 to 26.0, reflecting continuation of trend-following flows.
In contrast, Low Volatility remained subdued, with Nifty 100 Low Volatility 30 PE increasing only from 25.2 to 26.9, consistent with defensive factors lagging in risk-on phases.
Quality also saw a moderate re-rating, with PE rising from 27.9 to 30.1, suggesting continued demand for high-quality names but without the aggression seen in cyclicals and momentum.
Key takeaways:
The period between Mar2026 and Apr2026 reflects a clear risk-on shift across equity segments, with smallcaps and momentum factors leading valuation expansion. Valuation dispersion has widened further, with cyclical and momentum-driven indices re-rating faster than large caps and defensives.
Relative to historical ranges, Nifty 50 remains below its median valuation, Nifty Midcap 150 and Smallcap 250 are trading above its long-term median, while smart beta indices are broadly positioned above their historical median PE levels, indicating a general tilt toward richer factor valuations.
The simultaneous decline in dividend yields reinforces that the move is primarily price-driven rather than income-supported.
This update, when viewed alongside the earlier 21-quarter dataset, helps place current valuations within their historical percentile context for informed positioning rather than mechanical signals.
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The following updates are added after the blog was published on 03May2026:
P.S. 3: Update dated 09May2026
PE Expansion and Price Changes in Top Nifty 50 Constituents: (31Mar2026 – 08May2026):
Background: The earlier analysis of six NSE / Nifty indices (See P.S. 2 dated 09May2026 below in this same blog) highlighted how PE expansion, PB movement and price changes differed across market segments during the recent rally. This stock-level analysis of major Nifty 50 components extends that framework further by showing how earnings updates and valuation changes within heavyweight companies are shaping aggregate index behaviour during the ongoing results season.
Chart showing Top 15 Stocks in Nifty 50: PE Expansion Versus Price Changes: Observation period: 31Mar2026 - 08May2026
The table above provides a more granular view of the earlier Nifty 50 index-level analysis by comparing PE expansion and price changes across the top 15 stocks of the index between 31Mar2026 and 08May2026.
These 15 companies together account for 64.3 per cent of Nifty 50 weight (as of 30Apr2026), making them a meaningful sample for understanding how index-level valuation changes are evolving during the ongoing earnings season.
The table above shows that PE expansion across Nifty 50 is not uniform. Some companies show PE compression, others display modest PE expansion broadly aligned with price changes, while a few stocks have witnessed sharper re-rating.
This helps explain why Nifty 50 at the index level shows relatively lower PE expansion compared with Midcap 150 and Smallcap 250 despite the recent market rally (PE is for trailing twelve months).
A key observation is that most heavyweight financials such as HDFC Bank, ICICI Bank and State Bank of India show moderate PE expansion relative to price gains. This suggests that earnings updates from Jan–Mar2026 quarterly results are already being incorporated into trailing EPS calculations, partially offsetting valuation expansion.
The same pattern is visible in several other large constituents where PE changes remain lower than price appreciation.
Information technology (IT) stocks present an interesting contrast. Infosys shows PE compression of 9.6 per cent alongside a price decline of 5.8 per cent, while Tata Consultancy Services shows marginal PE compression despite positive price movement.
Infosys Ltd: From the above table:
Price change: minus 5.8 per cent
PE change: minus 9.6 per cent
This means that Infosys’ valuation has come down during the period, as its PE ratio declined more than the stock price. In simple terms, the market is paying a lower multiple for the stock even though earnings have increased in the Jan-Mar2026 quarterly period.
For the record, Infosys' PE on 31Mar2026 was 17.6 and the latest PE is 15.9.
Overall, this suggests that updated quarterly earnings are already having a noticeable impact on valuation ratios during the ongoing results season.
The table also highlights a few stocks where price gains significantly exceed PE expansion. For example, Mahindra & Mahindra stock gained 12.7 per cent while PE expansion was only 1.8 per cent, clearly indicating strong earnings support during the period.
Similar to Bajaj Finance, M&M Ltd too shows meaningful gaps between price change and PE expansion, indicating significant earnings contribution for the stock price.
Quarterly results yet to be declared:
An especially interesting subset is Bharti Airtel, ITC and Sun Pharmaceutical Industries, whose Jan–Mar2026 quarterly results were still pending as of 08May2026. Together these three companies account for around 9.8 per cent weight in Nifty 50 (note: for the remaining 12 companies in our sample, results have already been declared).
In all three cases, PE changes are almost fully aligned with price changes, indicating that trailing EPS figures have not yet been updated by fresh quarterly earnings. Their valuation movement therefore is driven mainly by price action rather than earnings revisions.
Big picture:
The broader implication is that Nifty 50 PE behaviour during earnings season is heavily influenced by the timing of result declarations among heavyweight constituents.
Since large-cap companies generally report earlier than smaller firms, earnings revisions are incorporated more quickly into Nifty 50 valuation metrics.
This partly explains why Nifty 50 shows lower net PE expansion compared with midcap and smallcap indices, where a larger proportion of companies are yet to report results.
Overall, the granular stock-level data reinforces the earlier conclusion that the recent rally in large caps is not purely driven by speculative rerating. Instead, the movement reflects a combination of earnings incorporation, selective valuation expansion and sector-level dispersion across heavyweight constituents.
P.S. 2: Update dated 09May2026
Valuation Re-rating across Largecap, Midcap, Smallcap, Low Volatility, Momentum and Quality Indices (31Mar2026 – 08May2026):
This note updates the earlier valuation framework by examining how select NSE / Nifty indices have moved from end-Mar2026 to 08May2026, focusing on Midcap 150, Smallcap 250 and Nifty 200 Quality 30.
The objective is to decompose recent price gains into PE re-rating and PB movement, and assess whether valuation changes are being driven by earnings support or multiple expansion.
While there are six Nifty indices included in the two charts below, let us focus on three indices, namely, Nifty Midcap 150, Nifty Smallcap 250 and Nifty 200 Quality 30, for our short analysis.
Across Nifty Midcap 150, Nifty Smallcap 250 and Nifty 200 Quality 30, price gains over the period have been accompanied by varying degrees of PE and PB expansion.
A. Midcap index: Midcaps show a relatively balanced pattern, with price change (17.2%) broadly aligned with PB expansion (17.1%), while PE expansion is lower (10.6%)
This suggests that a meaningful part of returns is being supported by earnings growth during the ongoing results season, which is partially offsetting valuation expansion.
Using a simple decomposition (price change ≈ earnings growth + PE change), the gap implies that earnings growth has contributed materially to index performance over the period.
Approximate calculation:
Index return = 17.2%
PE change = 10.6%
So implied earnings contribution is roughly, 17.2 − 10.6 ≈ 6.6%
This is consistent with a mid-cycle phase where both earnings and sentiment contribute to returns. Roughly half the return is coming from earnings improvement, and the rest from valuation re-rating.
B. Smallcap index:
In Smallcap 250, PE expansion (20.8%) is significantly higher relative to Midcap and closer to price change (22%), indicating that a larger share of returns is being driven by multiple expansion rather than earnings support.
This points to stronger re-rating dynamics in the segment and suggests that liquidity and sentiment are playing a more dominant role in price formation over the short window.
Nifty Smallcap 250 shows one of the sharpest valuation re-ratings in the current rally, with price returns of 22.0 per cent and PE expansion of 20.8 per cent between end-Mar2026 and 08May2026.
This suggests that a large majority of the gains so far are being driven by valuation expansion and risk appetite rather than confirmed earnings growth.
Since a large share of smaller companies are yet to report Jan–Mar 2026 results, the market appears to be pricing in strong future earnings expectations ahead of actual reported numbers.
If upcoming Jan–Mar 2026 earnings from smaller companies fail to meet elevated market expectations, the Smallcap 250 index could face a higher risk of valuation derating after the recent sharp rerating phase.
Important note: During early earnings reporting phases (like the current period starting from 1st week of Apr2026 to 1st week of May2026), large-cap stocks typically incorporate earnings revisions earlier than mid- and small-caps, which may partly explain cross-index differences in PE expansion.
C. Quality index:
In contrast to Smallcap index, Nifty 200 Quality 30 shows higher price appreciation (13.2%) relative to PE expansion (8.5%), indicating stronger earnings support during the period.
The gap between price and PE change suggests that trailing earnings have improved alongside price gains, resulting in a more fundamentally supported move compared to smallcaps.
For Nifty 200 Quality 30, most heavily weighted constituents have already reported their Jan–Mar 2026 earnings, and the relatively lower PE expansion compared with index returns suggests that NSE’s updated trailing EPS data is already reflecting earnings growth within the index.
PB expansion:
PB changes across all three indices are broadly in line with price changes, reflecting the fact that book values are not yet fully updated for FY25–26.
With annual reports still in the process of finalisation and current quarterly / annual results reporting cycles extending into late May2026, PB ratios remain relatively sticky in the short term and primarily track price movement mechanically.
In contrast, PE ratios are more responsive during the ongoing quarterly earnings season, leading to greater dispersion between PE and price changes across indices.
Overall, the comparison highlights a clear divergence in the drivers of returns across segments: Smallcaps are more rerating-driven, Midcaps reflect a balance between earnings and valuation changes, and Quality index show relatively stronger earnings support.
The market rally over the past five weeks has not been uniform across segments. Some indices have moved up mainly because valuations expanded rapidly, while others have seen stronger support from improving earnings and fundamentals.
Limitations of this analysis: This analysis covers six NSE indices, but the same approach can be used for other indices to understand how valuations are changing and whether index returns are supported by earnings contribution or driven mainly by re-rating (PE multiple expansion).
Footnotes:
As of 08May2026, only an estimated one-third of the top 1,200 listed companies by market cap had reported Jan–Mar2026 quarrterly results. Since trailing EPS data gets updated progressively during the earnings season, PE ratios across indices may continue to evolve over the coming weeks as more results are incorporated.
Price changes are based on price indices (not total return indices or TRI).
PE changes are based on trailing earnings, which are actively updated during the earnings season (it is assumed NSE India updates EPS on a regular basis), while PB ratios remain lagged due to delayed incorporation of FY 2025–26 book value updates.
Mathematically: Index returns ≈ earnings growth + PE rerating (PE expansion or compression)
The decomposition of index returns into earnings growth and PE change is an approximation and not a strict arithmetic identity.
Two charts below:
1) Chart showing valuation change in Broad Market and "Smart Beta" Nifty Indices >
2) Chart showing PE and PB Expansion versus Index Returns (only select indices) >
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P.S. 1: Update dated 03May2026
Using Historical Valuation Ranges: Key Caveats for Investors:
Markets are dynamic, but human thinking does not adjust as quickly.
It is not easy to change one’s views at the same pace as market movements.
Valuation ratios are only one part of the overall market picture.
They should not be used in isolation for investment decisions.
PE bands can offer a broad guide: one may be overweight at lower percentiles (for example, below the 25th), underweight at higher percentiles (above the 75th), and neutral in between.
However, investment decisions should combine multiple factors, not rely on valuation ratios alone.
Tracking valuation ratios of Nifty indices regularly helps in understanding where the market currently stands.
For instance, the current PE ratio of a midcap index (like Nifty Midcap 150) can be compared with its historical percentile range, in order to form one's own opinion on valuation range.
Please note: Current valuation ratios of each index can be compared with historical distribution to assess whether valuations are in the upper or lower quartile relative to history (the full data are shown in my previous blog, use "Summary data" table of 21 quarters for period from Mar2021 to Mar2026 for each of the six NSE Indices discussed in the blog).
Dividend yield can also be used as a cross-check alongside PE ratios.
The reference distribution itself changes over time.
Adding more data, especially during extreme market phases, can shift percentile levels.
So, these percentile bands are a moving benchmark, not a fixed measure.
While a 21-quarter dataset is limited, it can evolve into a more robust tool over time.
The valuation percentile tracker should be seen as a rough guide to overall market direction.
It is also useful for comparing relative valuations across different Nifty indices.
PE ratios of stock indices are influenced by both price movements of the underlying index and changes in earnings.
Quarterly data tends to smooth out short-term fluctuations seen in daily or monthly numbers.
The exact methodology used by NSE for updating valuation ratios may involve some timing differences with earnings updates (not sure whether NSE / Nifty Indices update data immediately or with a time lag).
During earnings-heavy periods, PE ratios can change quickly as new results are incorporated; the same applies when index providers change index composition.
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