The market’s disappointment with its own response to the tax cuts is hardly surprising. The market has this acute habit of hoping that all good things will come to its aid. Investors believe their portfolios have a natural right to benefit from path-breaking policy moves. The readiness of their invested companies to benefit from all good things is somehow assumed. So, the tendency is to retrofit and presume the accrual of benefits to own portfolios.

But, the reality is very different, especially when competitive intensity is dramatically shifting in every industry at a different pace. Fewer companies from among those who are apparent beneficiaries of the tax cuts will actually benefit from them. Benefit retention will be a huge challenge when the entire industry is in disruption. And, more companies who don’t seem obvious beneficiaries will positively surprise the markets. The smaller companies will probably suffer from lack of scale when more capital is out in the hands of larger players.

This sets the stage for a bigger disruption in the Indian equity investing mosaic. We believe that investors must move ahead of this disruption. Waiting for good things to happen and benefits to automatically accrue to older portfolios may be futile for many. Moving toward the future is no more a choice.

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