  We study the various sectors of the Bombay Stock Exchange (BSE) for a period
of eight years from January 2006 to March 2014. Using the data of the daily
returns of a period of eight years we investigate the financial cross
correlation co-efficients among the sectors of BSE and Price by Earning (PE)
ratio of BSE Sensex. We show that the behavior of these quantities during
normal periods and during crisis is very different. We show that the PE ratio
shows a particular distinctive trend in the approach to a crash of the
financial market and can therefore be used as an indicator of an impending
catastrophe. We propose that a model of analysis of crashes in a financial
market can be built using two parameters: (i) the PE ratio and (ii) the largest
eigenvalue of the cross correlation matrix.
