Synopsis: Sectors such as Oil & Gas, Metals & Mining, and Power & Utilities often trade at lower valuations due to various factors that suppress their P/E ratios, sometimes bringing them down to levels as low as 6.
Old Economy sectors like energy, utilities, and raw materials frequently trade at valuation multiples that sit well below those observed in high-growth technology or consumer markets. Investors often assign these lower PE ratios to reflect differing market expectations regarding future growth potential, capital intensity, and long-term risk profiles.
From government-mandated price caps in energy to the volatile and unpredictable cycles of global mining, these sectors below always see their stocks have a PE in a range much lower than the stocks of other industries.
Oil & Gas
The Oil & Gas sector remains a cornerstone of the global economy, yet its stocks frequently trade at single-digit multiples that are significantly lower than the broader market average. In the current market of 2026, major players like ONGC trade at a P/E of approximately 9 and Indian Oil trades at a P/E of around 6, reflecting a deep discount compared to growth stocks. This suppression is primarily driven by heavy-handed government regulation, which makes these Industries have an average PE as less as 13.
Since energy is a vital public utility, governments often intervene to dictate fuel pricing or impose windfall taxes during periods of high profitability. Furthermore, the threat of subsidy burdens looms constantly, if global crude prices spike, the government may force these companies to absorb the cost rather than passing it to consumers, making their earnings volatile and unpredictable. Unlike a tech firm that can scale its pricing freely, an oil company’s earnings ceiling is often set by a politician’s desk. Investors view these as utility-like entities with limited upside, resulting in a permanent valuation discount despite their massive cash flows and high dividend yields.
Metals and Mining stocks are classic cyclical plays where companies like Jindal Stainless Ltd and SAIL trade at a P/E of 21, which is a number clearly less even when comparing it to the industry average of 20. The fundamental reason for these low valuations is that their profits are tied to global commodity prices rather than internal company efficiency.
Whether a mining company is hyper-efficient or poorly managed, a 20 percent drop in iron ore or copper prices will devastate the bottom line of both. The market refuses to pay a premium for these earnings because they lack quality and sustainability; a bumper year of profit is often viewed as a temporary peak before the inevitable crash.
Additionally, mining is an environmentally and operationally risky business, prone to strikes, disasters, and geopolitical shifts. Because of this inherent instability and the lack of pricing power, investors demand a significant margin of safety. This lead to P/E ratios that rarely break into the high teens even when the companies are performing at their absolute peak.
Power & Utilities
The Power and Utilities sector features stocks that trade at modest levels such as Power Grid at a P/E of 18, while the industry average is also around the same number. These businesses require massive upfront capital expenditures to build plants and transmission lines, often funded by significant debt. While they provide essential services, their profit margins are strictly capped by regulators to ensure affordability for the public.
Other companies like Indian Energy Exchange (IEX) that is a digital marketplace for trading electricity and energy certificates, and CESC Ltd which is a power utility that generates and distributes electricity to end-consumers, also trade at lower PE multiples, with IEX trading at 23 and CESC trading at 14.
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