This week, Coal India Ltd overtook Reliance Industries Ltd (RIL) as India’s most valued firm. On Friday, very briefly, Oil and Natural Gas Corp. Ltd replaced RIL at the second spot.
Some would say that all this is due to the precious pile of natural resources these firms command. That is true: The high demand for their output and the high expected value of these resources in the future ensure that these remain market favourites.
It has been questioned whether this is a desirable outcome. Merely having high demand resources under its control should not be a reason for investors to favour one firm over others that are innovation- and ideas-driven. All this misunderstands the nature of a market economy. What matters are current profits and expected future returns, and not the source of those returns. It matters where the money comes from and not the colour of money.