Published Paper Details:

The Price-to-Earnings (P/E) ratio is a widely used valuation metric in equity markets, often guiding investment decisions. Conventional wisdom suggests that high P/E stocks are overvalued and prone to underperformance, whereas low P/E stocks are perceived as safer investment options. However, this study challenges this notion by analysing the relationship between P/E ratios and stock performance within the Nifty 50 index over a five-year period. The research examines sector-wise variations and explores whether high P/E stocks consistently underperform. The findings reveal that while some high P/E stocks fail to meet market expectations, others justify their valuations through sustained earnings growth and market leadership. Similarly, low P/E stocks do not always guarantee superior returns due to structural and macroeconomic challenges. The study highlights the importance of sector-specific analysis in investment strategies, emphasizing that valuation metrics alone should not dictate investment decisions. Instead, investors should incorporate macroeconomic factors, industry trends, and growth potential while assessing stock performance. This research contributes to a nuanced understanding of stock valuation and provides insights for investors seeking to optimize portfolio returns.