When we look at the Past decade of Economic Reforms in India, we see two camps – One has politicians with a controlling and arguably, authoritarian mindset. They are backed by a growing number of promoters who cannot come to terms with the fact that the under-the-table model of doing business has become dysfunctional in India. These promoters lobby that the Comptroller Auditor General and the Competition Commission of India are neutralized as quickly as possible so that business-as-usual can resume.
On the other end of the Spectrum are a disparate group of determined individuals including seasoned civil servants in key regulatory positions, some members of the ruling party at the Centre, RTI activists and sections of the pro-Lokpal camp. The lowest common denominator for this camp is that they will not let the old Raj of a dozen or so promoters and an equal number of powerful politicians turn India into Russia.
Neither camp has as coherent a philosophy. Out of self-interest (i.e. money and power) and partly out of a desire to push forward a dogmatic position each camp is taking up the cudgels as we approach the next General Election. The next General Election will arguably be one of the most critical in recent years as for the first time Indians will have to choose between these two ideologies. Can the Election Commission Rise to BUYING the Indian Mandate with Money and Liquor ?
This tussle for the reins of power in India therefore will be one which will shape the country’s economic prospects in the decade ahead. Naturally, therefore it will have a bearing on the composition of the Sensex in the next decade.
How can we Relate this to Economy ?
Out of the 30 companies that were in the Sensex in 1992, only 12 survived in 2002 implying a 60% churn ratio. The end of “License Raj” in 1991 resulted in a number of these old school textile and industrial companies being washed away in the 1990s. Thus it is safe for us to conclude that half of the current Sensex companies are likely to be out of the Sensex by 2022. As political power fragments in India and as politicians and civil servants refuse to play ball with promoters, Sensex companies whose key competitive advantage is political connectivity are likely to fall away.
So this means that the current Midcaps will strive and become multibaggers of the coming decade who will be able to avoid interface with India’s poisoned governance and build empires at home and abroad aided by a devalued currency. So start looking out for them.