See the attached the Nifty P/E chart. This is the chart we should be trading with because the FIIs are looking at it.
Nifty has traded in a P/E range of 10.5 to 26.5 in the last 14 years from Jan 2000 to Oct 2014. About 95% of the time, Nifty has traded in P/E range of 12 to 24, with P/E 15-17 as ideal buying level, and P/E 21-23 as ideal selling level.
Risk-reward ratio for investors has been poor above P/E 21, but nimble traders can ride the Nifty long and exit/sell on downturn. Nifty is currently near P/E 22 at cmp 8383. There is trend line resistance on Nifty P/E chart around 23, so maybe 4-5% upside left till 8700, maybe not.
The following Nifty P/E Chart credit goes to Piyush Dwivedi.