This small/midcap bear market is our 2nd most brutal in history. In 1992 you knew the Harshad was caught. In 2000 NASDAQ was bleeding & Ketan had been trapped. This time it was the system cracking - a box full of fire crackers catching fire. You don’t know which one bursts when!
Post the fall in 1992, EOUs, FMCG and software took over the leadership. Anything to do with ‘EOU’ was bid up. Post 2000 the large pharma companies like Dr Reddy’s starting moving and so did a lot of PSU divestment candidates.
Though the Govt. sold only a handful of PSUs the rally spread across the sector far and wide SCI, BEL, BEML, EIL, CONCOR & more were the shining stars till 2003. Companies that were debt free available at single digit P/Es with a dividend yield of 7% to 10% went up 10 to 30x.
The PSU momentum broke down when UPA2 assumed power and scrapped the thought of selling family silver even though family members were starving to death. The sector leadership quickly changed. From Pharma and PSUs to Infra, telecom, real estate & retail.
As stated, in 1992 the sector leadership had shifted to FMCG and IT and those two sectors did nothing post 2000. Many careers and portfolios were built just before the bubble burst. And when the bubble burst it was NOT on valuation but on growth slowdown.
I could never participate because I could never figure out how a company without any fixed assets like Infosys could ever make money for shareholders. The stock went 3000 times under my nose as each day I waited for the bubble to burst.
And when the bubble burst in 2000 it sucked everyone including me. Since then the stock did nothing for years before the leaders recovered in price while the others fell 90% and more. In 1992, ACC was the leader it survived, recovered and regained in price after 14 years in 2006.
Infosys took 7 years to regain price; HUL almost a decade. Most self styled value investors highlight the advantages of low P/E investing suggesting how these stocks took years to regain in price. What they miss out is the kind of money these stocks made before topping out.
What investors miss out is how the low P/E duds fell 90% and then 90% again - losing 99% and then 100% on the leftover 1% - before getting delisted. The biggest run to the top happens in the leaders before the stocks actually top out and it’s quite visible on the screen.
Post 2009 and till 2014 a wide spread high quality stock rally ensued where companies like Page, Sun Pharma, Eicher, Auro etc moved up 50 to 100x. No one bought till 2015 when they made their top and once a top was established the retail and institutions - flocked in to buy.
People watch in disbelief till the top is made - then they start getting sucked in. And a top isn’t made till the retail guy starts buying. The story continues till the retail participant armed with his excel sheet doesn’t buy. More the scepticism - bigger the bubble.
Since 2014 we’ve had a ferocious mid/small cap rally. And the last 18 months have seen a brutal sell off. How long will this continue before we see a broad based rally - again?

That’s for you to find out and for me to know and for me to find out and for you to know. Painful!
* Nothing that I’ve referred to here constitutes a recommendation. Stock names have been added just to ease up the understanding process.
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