What can bear market do to stock prices

I want to highlight in this post the severity of bearish phase of 2001-2003 on the Indian stock market. I will explain with two examples.

The first one is CRISIL. The company had an earnings of around INR 16, 20.17, 20.84 and 15.59 in 1997, 1998, 1999 and 2000 respectively. The stock price reached a high of INR 825 in December 1999, that comes to be a P/E of 40. In the brutal IT bust, the stock price went down to 96, a P/E of less than 5 and it remained below 150 for the rest of 2001. Today it is trading at 3500. The consolidated earnings have increased to 117.8. In 7 years, the company made more earnings than what its market capitalization. A person who would have bought the stock at 200 at a P/E of 10 would have seen his capital eroded by 50% in 2001-2002.

The second one is Blue Star. The company had earnings of around INR 8.21, 8.62, 9.04 and 12.92 in 1997, 1998, 1999 and 2000 respectively. The stock price reached a high of INR 233 in January 2000, that comes to be a P/E of 20. In the bust, the stock price went down to 18.7, a P/E of less than 2 and it remained below 40 for the rest of 2001 and most of 2002. The company paid INR 4.5 and 5.5 as dividend in 2000 and 2001. In two years you would have got 50% of your capital back. Today after a 5:1 split, the stock is at 400. Company made 5 times profit this year than what its market capitalization was in 2001. A person who would have bought this stock at a P/E of 10 at a price of 100 would have seen his capital eroded by 80% in 2000-2001. Even Benjamin Graham and Warren Buffet would have got scared and sold these stocks.

Both this examples say only one thing:
Stop seeing the ticker on CNBC-TV18/NDTV-Profit/Zee Business. You may commit a mistake of selling a future Blue Star or CRISIL.

Those people who would like to compare these stocks with L&T, GMR and JP Associate today should see that even after the correction of 50%, they are not even below P/E of 30. JP associate at a price of 160 is trading at a P/E of 40 even after 70% correction from peak of 525. GMR at 100 is trading at a P/E of 80 even after correcting 60% from a peak of 250.