Good morning.

You woke up and brushed your teeth with Patanjali toothpaste.

You then had Tea / Coffee from an unbranded player.

You had bought all this from a shop called D’Mart or an NGO.

You used an ordinary unbranded soap, used your Samsung phone to check on your email. The data services were provided by your local cable walah.

You travelled in your Honda City, and paid your driver his salary in cash.

You ate lunch at McDonalds, and there you had Coke. This was in a mall that is privately owned.

See the pattern? the market just missed your expenditure. Totally. If you use Colgate, Lux, Dove, a Bharti Airtel connection, a Tata / Maruti car there could be some capture by the sensex. Currently too many of the consumption stories are just not there in the index. With the listing of Indigo, Jet and Spice Jet a big portion of the corporate expenses are now being captured by the index, otherwise that was also missing. With the listing of Hdfc Life Insurance and the Icici Prudential Life Insurance (say 15 months away?) one more big industry will come into the equity market. We need more auto companies to be listed. Instead the reverse is likely to happen. HuL, PnG, Suzuki, ..the big consumption stories are more likely to be delisted. We are waiting for the Vodafone listing in India – and that might capture some of your expense, but these do not seem to be enough.

I am not sure why the government needs to do an FPO for Coal India. Why cannot it just keep selling small quantities regularly to the FII and the Mutual funds in private deals? Say lot size of 100,000 shares? That will give them Rs. 350 crores..and it is a good way of reaching the retail investor. Why not give the mandate to one broker to keep selling 100,000 shares in lots of 1000 shares every day over a year? That will again improve retail participation? No. No big broker wants to give such suggestions, right?

If you are ¬†wondering why the common man is willing to invest in mutual funds but the participation in direct equities is not going up it is because there seem to be no success stories that people are talking about. Well not the recent starters. Not sure if Indigo’s success will attract more corporates to come out with an IPO and whether more new people will want to come to direct equities. Reliance Power has no clue how much damage they did to the investor psyche. It will take 10 success stories like TCS and Indigo (short term success) to pull people back into the equity market.

If the big success stories in India are all in the unlisted space it is doubtful how the consumption stories will pan out for you as an investor.

Too much of the dividends are a huge out flow for the country as a whole. So when HUL, Hdfc, Hdfc bank, Icici bank…etc. pay dividends there is a good chance that NOTHING is being captured by the market capitalization. It is used by the shareholder to decide what to there is some more money lost to the market cap of India.

So if your auto, banking, pharma, Fmcg …the success stories with huge dividend payouts are not being captured by the markets, you are in trouble. Your big borrowers from banks are the infra companies, energy companies, and those companies who do not have too much of a cash flow.

Now you know why the GDP is going up, but the market capitalization is not going up in sympathy. Sigh.

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  1. Subra Sir,

    Patanjali is threatening HUL (fmcg products), ITC (Baba pushing ppl away from tobacco), Britanni (biscuits).

    Flipkart/Snapdeal/Amazon: all threatening Future retail, Reliance, Pantaloons and all other listed retail entities.

    OLA/Uber: threatening personal car consumption space already

    there are most stories to what I have mentioned above (due to startups and apps)

    I see some pattern here, most of the action is happening outside the listed space and retail investor are on loosing revenue side of companies due to ownership in listed entities.

    So either ways, market needs to capture this too else listed space itself might be outdated (need to do something else to capture the VC fundings).


  2. McDonalds => Westlife Development Ltd

    Anyways I don’t agree with this article. There will be trickle down impact of our purchase which will always help the listed companies. If the country’s GDP is increasing, it will benefit the listed players also. Its not a zero sum game that if my purchase is helping some unlisted company, it is by definition hitting some listed company. Is is not.

  3. For every Indigo, there are CCD types of ipos as well. Will Indigo continue to perform as they claim they were in the earlier years?

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