The emergence of this triple-digit PE phenomenon within the Nifty creates a tale of two markets: while PSU mining giant Coal India trades at a modest 7x earnings, representing old-economy value, new-age stocks like Eternal (484x), Jio Financial (123x), and Tata Group’s retail crown jewel Trent (124x) lead the triple-digit PE club.
This valuation divergence, from Coal India’s 7x PE to Eternal’s 484x, represents one of the widest spread in Nifty history, raising questions about whether India’s premier index is witnessing rational pricing of future growth potential or speculative excess that could unwind when lofty expectations meet ground reality.
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The Trent Reality Check
The risks of such elevated valuations became starkly apparent with Trent’s recent performance. The stock has plummeted 24% year-to-date and dropped 12% in just one week amid mounting concerns about its ability to sustain the blistering 35% compound annual growth rate it delivered over the past five years.
The company’s standalone revenue growth in Q1 slowed dramatically to just 20%. At its AGM, management disappointed investors on near-term growth expectations in its core fashion business, which is expected to deliver around 20% growth in Q1FY26, sharply down from its five-year CAGR of 35%. While management reaffirmed their aspiration of 25%-plus growth for the coming years, the current run rate falls significantly short of that target.
“This is what happens in high PE stocks. Any disappointment in growth leads to sharp decline in share prices,” noted one market observer. Among the triple-digit PE stocks, Eternal has lost around 5% of its value so far this year, while Jio Financial has bucked the trend with a 10% gain.
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Fund Managers Weigh In
“In established high-growth companies, we are seeing that the market prices in high terminal value i.e. the ability of these companies to scale, reinvest, and capture fast-growing markets for a long period of growth,” said Mihir Vora, CIO of TRUST Mutual Fund. “That can justify elevated multiples but it’s not a free pass. Investors are quick to reassess if execution falters.”
Vora emphasized that while some businesses are being rewarded with high PEs, that premium is conditional. “It’s based on consistent delivery, expanding addressable markets, and reinvestment discipline. In the case of cash-burn models, the current earnings are less relevant and the valuations are based on the market’s expectation of the profits after a few years.”
Atul Bhole, Executive Vice President and Fund Manager at Kotak Mutual Fund, cautioned against generalizing this trend. “From time to time, few companies emerge, which exhibit high growth potential with a large target opportunity set & their perceived ability to capture those opportunities. Such incidents need to be evaluated on a case-by-case basis and cannot be generalised as mainstream,” he said.
Bhole warned of the risks inherent in such valuations: “Even when the market is collectively accessing the growth potential, there are risks of following herd mentality which can be completely misplaced. Changes in regulatory, competitive or tech environments can support or derail such hypotheses.”
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, provided historical perspective: “We have had many instances in the past as well where fancied stocks like Wipro, Infosys used to command very high PE multiples beyond 100. It was during the 2000s amid the Y2K issue.”
The Dalal Street veteran attributed the current valuation environment to structural changes in the Indian market. “Generally, valuations are on a higher side in India. It is because of the explosive growth in demat accounts, money is flowing into stocks both directly as well as through the SIPs in mutual funds. With so much money being poured in, valuations will remain on the higher side. It will be very difficult to buy India at a cheap price.”
However, he cautioned about the inherent risks: “Whenever valuations are high, there can be unexpected big corrections. We must be circumspect in high PE stocks.”
Regarding the specific companies in the triple-digit PE club, Vijayakumar offered mixed views. “For Jio, we are not very sure about growth prospects. The business is still in an infancy stage, not much is known. They have entered the mutual fund business which is already a highly competitive industry.”
He was more optimistic about the other two: “Trent and Eternal long term prospects are very good. Eternal is not a one or 2-year-old story but a decadal play.”
The extreme valuation divergence within the Nifty 50, from Coal India’s 7x PE to Eternal’s 484x, reflects a market grappling with how to value traditional businesses versus new-age growth stories. While fund managers acknowledge that high multiples can be justified for companies with long growth runways, the Trent example serves as a stark reminder that execution risks remain paramount.
As investors navigate this new landscape where triple-digit PEs have entered India’s most prestigious index, the key question remains: whether these valuations represent rational pricing of future growth potential or a sign of speculative excess that could unwind when growth expectations meet reality.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
