May 2026 Valuation Check: IT, Hotels, Retail Attractive; Defence Still Expensive
Indian equities may have witnessed some moderation in May 2026, but valuations across several sectors continue to remain elevated compared to their long-term averages, according to a sectoral valuation study by PL Capital.
Sectoral Valuations Remain Mixed
PL Capital's latest quantitative report shows that while pockets such as information technology (IT), fast-moving consumer goods (FMCG), hospitals, hotels, real estate, and retail now trade below historical valuation averages, cyclical and industrial sectors continue to command premium multiples.
- Industrial and cyclical sectors such as capital goods, cement, chemicals, automobiles, auto parts, and textiles continue to trade above long-term averages.
- Defence and power sectors are among the most expensive pockets, with defence trading at a one-year forward P/E of 36 times and power at 24 times forward earnings.
IT, Retail Offer Valuation Comfort
On the other hand, some sectors that have underperformed over the past year appear relatively inexpensive.
- The IT sector is trading at a forward P/E of 17 times, significantly below its long-term average of 22 times.
- Retail stocks appear attractive from a valuation perspective, with a forward P/E of 57 times, well below its long-term average of 78 times.
- Hotels trade at 32 times forward earnings compared with a long-term average multiple of 47 times.
- Real estate stocks are available at 26 times earnings versus their historical average of 36 times.
No Broad-Based Cheapness in the Market
Despite the divergence across sectors, PL Capital does not see broad-based cheapness in the market.
"Most sectors remain within their historical valuation bands, indicating limited signs of deep undervaluation across the market," PL Capital said.
- Pharmaceutical companies are broadly trading near fair value.
- Metals, oil and gas, and textiles remain moderately above their long-term averages amid continued cyclical strength.
For investors, valuation opportunities are increasingly concentrated in select pockets rather than the broader market, the brokerage pointed out.
Disclaimer
View and outlook shared on the stocks/sectors belong to the brokerage and are not endorsed by Business Standard. Readers discretion is advised.
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