If the market is believed to be overvalued, P/E ratios would be expected to decrease.

[stuartbale1]

I am not getting this concept, when market is overvalued pe would be expected to decrease?

 

[Harrogath]

If price is overvalued, then the P/E is currently higher than it should be. The prices of overvalued stocks tend to decrease to their fundamental levels. If P decrease, then P/E decrease.
Remember that earnings is a fundamental and prices try to reflect that fundamental. So, if a price does not correctly reflect the fundamentals, it will be corrected by arbitrageurs.

 

[olajideanuoluwa001]

If the present P/E ratio is higher than the implied P/E ratio or the trailing P/E ratio, then the Market is overvalued, otherwise undervalued.
So to adjust for the mispricing, demand for an overvalued security will fall, causing price to fall, and the P/E ratio falling to its fair P/E ratio.