If NaMo and his team do good for the country, that will be good for the economy, so that will be good for the companies, so it will be good for the shareholder, right?

Not so fast my friend. Let us see what happens when by some quirk of fate competition is shut out. Take ITC for example. There is no ban on cigarette production, marketing, advertising, of tobacco. However, new entrants are not allowed..so immaterial of what you do, the share price of ITC is likely to go up better than inflation for sure.

Take big government projects. There are a few companies which have a stranglehold on the big projects. They may have got it with their political clout. Who would have imagined that companies like GMR and GVK will be so big and successful – to bid and get I mean! Earlier a few companies owned all the routes to the government contracts, and made tons of money for themselves and were willing to share it with their shareholders. Here all of the route was nice, oily, slick and smooth.

Suddenly a new government comes and gives contracts to everybody. More companies, more contracts. The pie is getting distributed better. The old companies which had 3 major skills – getting the contract, executing the contract, and collecting the money now find that 2 of those skills are redundant. So their costs are much higher than what is now needed. The Baboo(s) must be telling them…wait, things cannot change so fast….So there is confusion..

So what do you do as a shareholder? Really difficult question to answer. I am not willing to invest in a company which has got defense capability. I have no clue whether a) they will get the contract b) will they be able to execute it? c) will it be successful in terms of pricing / collection, etc.

What it means for the ordinary shareholder is simple:

Do not assume that what is good for Na Mo is good for you.

Live a simple life, keep looking at numbers in terms of goals, not ‘what the govt is doing’ – we cannot understand the macro

Look for signals all around, there are good fresh ideas which will get implemented, and somebody will make money. Leave it to the fund managers to decide when, how much, what to buy. I can assure you these are difficult, but interesting times…the best is yet to come.

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