India’s capital market ecosystem extends well beyond stockbroking. It includes exchanges, depositories, asset managers, registrar and transfer agents, brokers and investment platforms. Together, these companies provide the infrastructure needed to raise capital, execute transactions and hold financial assets. Their earnings are linked to trading volumes, investor flows, assets under management and fundraising activity.
The sector has benefited from the widening participation of retail investors. Demat accounts have increased. Mutual fund inflows have strengthened. Trading activity and public fundraising have also expanded. This growth has raised demand for services across the capital market value chain.
However, strong industry growth has also pushed up the valuations of several capital market stocks. This makes it important to separate business growth from the price already reflected in a stock. The P/E ratio provides a simple way to make this comparison. It measures how much investors are paying for each rupee of earnings. It is particularly useful here because most established capital market companies are profitable and relatively asset-light.
We began with a list of listed capital market companies. We then removed companies with a market capitalisation below Rs 5,000 crore. The remaining stocks were ranked by their positive P/E ratios. The three companies with the lowest P/E ratios were selected.
#1 IIFL Capital Services: Wealth Expansion vs Broking Drag
Incorporated in 1996 as a broking arm of the IIFL Group, IIFL Capital Services provides retail and institutional equities, financial products distribution, commodity broking, currency broking, investment banking, financial planning and wealth management services to retail and institutional customers across India.
IIFL Capital Services Financial Performance
| Metric | FY26 |
| P/E | 18.6x |
| Five-year median P/E | 10.6x |
| Revenue growth | 1.4% |
| Net profit growth | -20.9% |
| RoCE | 23.2% |
| RoE | 20.2% |
Business Diversification: Wealth & Distribution Cushion Core Broking Drag
IIFL Capital Services operates across retail broking, institutional equities, investment banking and financial product distribution. It is also expanding its wealth management and investment products. This diversification helped cushion weakness in its core retail equities business during FY26.
Operational revenue stood at Rs 2,439 crore in FY26. This was up 1.4% year-on-year. However, profit after tax declined 20.9% to Rs 564 crore. This was on account of rising employee, finance and technology costs. Operational profit before tax also declined 22% to Rs 592 crore.
Retail equity revenue fell 9% to Rs 1,121 crore. The business faced the full-year impact of regulatory changes introduced by the Securities and Exchange Board of India. This pressure was partly offset by other divisions. Institutional equities and investment banking revenue rose 11% to Rs 712 crore. Financial product distribution income increased 16% to nearly Rs 590 crore.
Beyond Broking: How ₹52,000 Crore in Distribution Assets Cushioned IIFL
The distribution business emerged as a key growth driver. Assets under distribution increased from around Rs 31,000 crore to Rs 52,000 crore. Mutual fund assets rose from Rs 14,000 crore to nearly Rs 21,000 crore. Growth was also seen across alternative investment funds, portfolio management services and fixed-income products. The recently established ultra-high-net-worth channel accounted for around Rs 12,000 crore of assets.
IIFL Capital now plans to add more relationship managers to its wealth business. It currently has around 50 wealth relationship managers. It also has more than 300 relationship managers serving affluent and broking clients. The company did not provide a hiring or asset growth target for FY27.
The company is also moving beyond distribution into manufacturing its own investment products. It has introduced products through its PMS and AIF platforms. These cover early-stage, late-stage and credit strategies. Its capital credit opportunities fund raised around Rs 500 crore. Meanwhile, a net worth of more than Rs 3,000 crore gives it room to fund growth in broking, margin trading and wealth management. Management is also evaluating acquisitions and new projects. However, no definite transaction has been announced.
18.6x P/E: Cheaper Than Sector Peers, But Above Historical Averages
IIFL Capital has a return on capital employed (ROCE) of 23.2% and a return on equity (ROE) of 20.2%. Its stock trades at a P/E of 18.6 times. This is well above its five-year median of 10.6 times. Its current P/E is close to the peer median of 20.2 times. It is higher than the company’s historical multiple.
The relatively low P/E within the screened capital market universe may reflect concerns over weaker retail broking revenue, regulatory changes and rising costs. Profit also received support from a roughly Rs 90-crore property-sale gain.
The stock may therefore appear cheap against selected peers, but not against its own trading history. Further gains will depend on whether growth in wealth, distribution and investment banking can offset pressure on the retail business and restore core profitability.
Below is the 5-year P/E chart of IIFL Capital Services.
IIFL Capital Services 5-Year P/E Chart
#2 UTI Asset Management Company: AUM Scale vs Active Equity Outflows
UTI Asset Management Company operates across mutual funds, pension funds, portfolio management and alternative investments. It also manages money for overseas institutions.
UTI Asset Management Company Financial Performance
| Metric | FY26 |
| P/E | 21.5x |
| Five-year median P/E | 20.0x |
| Core revenue growth | 6.5% |
| Normalised PAT growth | -30.1% |
| RoCE | 15.6% |
| RoE | 10.3% |
AUM Scale & SIP Growth: Equity Outflows Weigh on Core Profitability
Consolidated core revenue rose 6.5% to Rs 1,539 crore in FY26. However, normalized profit after tax declined 30.1% to Rs 511 crore. Employee costs increased as the company invested in distribution, technology and its subsidiaries. Other expenses also rose 15%. The company ended FY26 with group assets under management of Rs 23.42 lakh crore.
Its mutual fund asset under management (AUM) increased 14.5% to Rs 3.88 lakh crore. This was up from Rs 3.39 lakh crore a year earlier. UTI added 7.16 lakh new investors during the year. Its total folio base reached 1.38 crore.
The SIP Shield: Why Digital Inflows are Masking UTI’s Active Equity Drag
Systematic investment plans (SIP) flows remained a key source of growth. Annual SIP inflows rose 13.4% to Rs 9,442 crore. Active SIP folios increased 9.7% to 29.53 lakh. The SIP book reached Rs 39,813 crore. Around 76% of new SIP registrations came through digital channels.
The company also expanded its product portfolio. The UTI Multicap Fund collected around Rs 1,000 crore. The UTI Arbitrage Fund crossed Rs 10,000 crore in AUM. Its passive business reached Rs 24,897 crore across ETFs and index funds. UTI plans to launch more passive products in FY27. It also aims to introduce at least one specialised investment fund, subject to regulatory approvals.
Its pension business remained another growth engine. Pension AUM rose 11.8% to Rs 4.02 lakh crore. Private-sector pension assets increased 46%. UTI also secured fresh five-year mandates from the EPFO and CMPFO.
Management believes much of the operating platform is now in place. UTI operates through around 270 branches. It added nearly 90 financial centres over the past 18 months. The company now plans to improve productivity without adding significant costs to the mutual fund workforce.
However, active equity remains a weak spot. Equity net flows were still marginally negative in FY26. Several schemes have faced redemptions over the past few years. UTI is trying to reduce its dependence on a small number of flagship funds. It also wants active equity and SIPs to form a larger part of sales. These products earn higher fees than passive funds.
The international business also faced pressure from foreign investor outflows. It ended FY26 with AUM of Rs 16,144 crore across clients in more than 30 countries. UTI has received a retail fund management approval at GIFT City. It plans to use the platform for both inbound and outbound investment products.
21.5x P/E: Cheaper Than Sector Peers, But Above Historical Averages
UTI AMC trades at a P/E of 21.5 times. This is slightly above its five-year median of 20 times, but well below the peer median of 37.9 times. The discount may reflect weak active-equity flows, a high share of lower-yielding passive assets and the sharp fall in FY26 profit.
Its ROE of 10.3% is also modest despite an ROCE of 15.6%. The valuation gap could narrow if UTI improves active-equity flows and converts its existing distribution capacity into stronger earnings growth.
Below is the 5-year P/E chart of UTI Asset Management Company.
UTI Asset Management Company 5-Year P/E Chart
#3 Indian Energy Exchange: High Margins Under Market-Coupling Shadow
Indian Energy Exchange (IEX) operates a digital marketplace for power, renewable energy certificates and energy-saving certificates. Its subsidiary, Indian Gas Exchange, provides a trading platform for natural gas. The business benefits from rising short-term power procurement and the gradual shift towards market-based electricity pricing.
Indian Energy Exchange Financial Performance
| Metric | FY26 |
| P/E | 23.3x |
| Five-year median P/E | 41.6x |
| Revenue growth | 14.7% |
| Net profit growth | 14.9% |
| RoCE | 51.8% |
| RoE | 39.4% |
Market Dominance & High Margins: Volume Expansion Drives Core Growth
IEX’s consolidated revenue rose 14.7% to Rs 616 crore in FY26. Net profit increased 14.9% to Rs 493 crore. Operating profit rose 14.5% to Rs 520 crore. The operating margin remained stable at 84%.
The earnings growth was supported by higher electricity trading. IEX recorded its highest-ever quarterly electricity volume of 39.4 billion units in Q4. This was an increase of 24.3% YoY. Full-year electricity volume rose 17% to 141 billion units.
Why 55 Billion Units in RTM Defend IEX’s 84% Margin
The Real-Time Market remained the strongest growth engine. Its volume increased 41% to 55 billion units in FY26. It accounted for 39% of electricity traded on IEX. The segment helps power buyers respond quickly to changes in demand and renewable generation.
Green market volume also increased 23% to 10.8 billion units. Meanwhile, 18.7 million renewable energy certificates were traded during FY26. This was up 5%. New renewable purchase obligations and virtual power purchase agreements could support further growth in these segments.
IEX is also seeking regulatory approval for new products. Its proposals include extending Term-Ahead Market contracts to 11 months and introducing Green Real-Time Market contracts. It has also proposed peak-hour Day-Ahead and Real-Time Market segments. Orders from the Central Electricity Regulatory Commission are awaited.
The Indian Gas Exchange provides another source of growth. Its full-year trading volume increased 28% to 76.8 million MMBtu. Profit rose 35% to Rs 41.9 crore. However, Q4 volumes declined 8% because of supply disruptions in the Middle East. The company has initiated the process for an IGX public offering.
Future opportunities include electricity derivatives, battery-storage trading and carbon credits. The government is developing a framework for carbon-credit trading on power exchanges. IEX has also recorded its first trades from merchant battery-storage projects.
The Regulatory Overhang: Why the Threat of Market Coupling is the Real Valuation Driver
Despite this growth, regulatory uncertainty remains the main valuation overhang. The CERC has proposed market coupling for the Day-Ahead Market. Under this mechanism, orders from different exchanges would be pooled to determine a common price. This could weaken IEX’s pricing and liquidity advantage. It may also affect market share, although the final regulations and implementation process are still pending.
23.3x P/E: Cheaper Than Sector Peers, But Above Historical Averages
IEX trades at a P/E of 23.3 times. This is sharply below its five-year median of 41.6 times and the peer median of 52.8 times. The discount is notable given its ROCE of 51.8% and ROE of 39.4%.
It largely reflects the uncertainty surrounding market coupling rather than weakness in operating performance. The stock’s future re-rating will depend on regulatory clarity and IEX’s ability to preserve volumes and margins under any new market structure.
Below is the 5-year P/E chart of Indian Energy Exchange.
Indian Energy Exchange 5-Year P/E Chart
The Broader Horizon: Three Additional Asset-Light Plays Trading Under 28x P/E
Canara Robeco Asset Management Company was next at 24.1 times P/E. Its earnings are largely linked to growth in mutual fund assets and management fees.
Motilal Oswal Financial Services followed at 26.5 times P/E. It has a diversified presence across broking, asset management, wealth management and investment banking.
Angel One traded at 27.1 times P/E. Its performance is driven mainly by retail broking activity, client additions and the expansion of its digital financial-services platform.
Conclusion
India’s capital market sector has grown along with retail investing, mutual fund participation and trading activity. Yet, not every company benefits in the same way. Some depend on trading volumes. Others earn from managing assets or processing transactions.
A low P/E makes these stocks worth a closer look. But there may be reasons why the market values them cheaply. Regulatory changes can hurt volumes or fee income. Profits can also rise and fall with market conditions. In some cases, current earnings may not be sustainable.
Investors should therefore look at what lies behind the valuation. Market share, earnings quality, return ratios and growth plans are equally important. If these businesses continue to grow their profits, their valuation gap could narrow. If growth weakens, a low P/E alone may offer little comfort.
India’s Cheapest Capital Market Stocks
| Metric | IIFL Capital | UTI AMC | IEX |
| P/E | 18.6x | 21.5x | 23.3x |
| Five-year median P/E | 10.6x | 20.0x | 41.6x |
| FY26 revenue growth | 1.4% | 6.5% | 14.7% |
| FY26 profit growth | -20.9% | -30.1% | 14.9% |
| ROCE | 23.2% | 15.6% | 51.8% |
| ROE | 20.2% | 10.3% | 39.4% |
You can track how these are progressing by adding stocks to your watchlist.
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Ekta Sonecha Desai has a passion for writing and a deep interest in the equity markets. Combined with an analytical approach, she likes to deep dive into the world of companies, studying their performance, and uncovering insights that bring value to her readers.
Disclosure: The writer and her dependents do not hold the stocks discussed in this article.
The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.