Sensex at 11k: A Theory

Some days ago I asked myself why is the Sensex at 11k.

Now the operating principle of the stock market is quite simple. More profit your company makes more investors it will attract. It is a cyclic process. For the Sensex to be climbing Mt. Everest clearly the Indian companies had to be growing real fast and having excellent profit predictions (duh!).

Then I asked myself how are Indian companies able to generate insane profits and grow as fast as a fungus. Three simple reasons:
1) Availability of skilled labor at cut rate prices.
2) Re-investment of a part of the profit to fuel the growth of the company
3) Currency Imbalance.

The third point is a very interesting point. The Indian companies charge their 'international' clients in 'international' currencies. Thus an Indian company will charge a UK based client in pounds. Thus due to the conversion rate between currencies the relatively small amounts in the clients country become insanely large amounts in India. Ofcourse the actual guy doing the work in India never sees more than a small percentage of that (see point 1).

This led me to question till when will the Indian companies be able to generate this growth and attract the big FDI? How many Process Outsourcings (Business PO -> Knowledge PO -> Legal PO -> ?) can we exploit. We already remotely manage the computer networks and databases of the world. What do we remotely manage next?
The saturation point is surely coming. It might not come during my working life (next 20-25 years) but it will come. It will come years BEFORE India becomes a 'world power'.

The next logical question was: what can India do to ensure that when the saturation comes our growth and economic stability is not affected? The answer according to me is simple to state but difficult to implement.
We need to stop going after short term profits, change the 'make hay while the sun shines' attitude and start re-investing some of the profits into Research and Development activities (RnD). This RnD might not contribute immediately to the growth of the company but if done properly it will provide a solid foundation for its future growth.
Instead of dangling huge profits in front of people and investors if those profits are put back into things like local infrastructure development, human resource development and procurement of new technology it will lead to the creation of an ideal environment which can support the future growth of the company instead of hampering it.
Don't give out fat dividends at the end of the quarter. Trim them and use the extra cash to recruit top-notch researchers and to launch research projects to improve the position of the company within its field of work. Don't just provide support for new technology. Create the new technology.

It is funny but providing support (and thus understanding) new technology is just one step away from improving upon it and making your own.

It is a shame that our company solves the IT needs of the world. Yet we are not able to come out with any IT products/services of our own.

Furthermore research in India has been more about 'copy the west' or 'run to the Russians'. This attitude is developed right from the word go. In India most colleges and universities won't even bat an eyelid if you copy an assignment or indulge in plagiarism.
Here in UK such things are treated with a great deal of seriousness especially at the masters and bachelors level. Having done my MSc from a not-so-great university in UK I can attest to the fact that if you copy or plagiarise you are in deep shit. It is not just a question of repeating the module or re-submitting the assignment, your degree itself can be cancelled.

This is something we need to introduce in India from atleast the +2 level (11th & 12th class). In research community people who copy and plagiarise have no place.