Monopoly Stocks in India: The Case of 'Winner Takes It All'

At its recent analyst meet, Reliance Industries showed visuals of the new energy construction in the state of Gujarat.

The company claimed that the facility effectively spans 44 m sq. ft., nearly 4 times Tesla's gigafactory at Nevada, US.

Tata Power, NTPC Green, and Adani Green Energy are among the few other players that have the bulk of the green energy capacity currently.

Financial support from the government for the green energy corridors and solar parks supported the development of large-scale solar parks and ultra-mega solar power projects across the country.

Similarly, government policies facilitating liberalised spectrum allocation, especially for 4G and 5G, allowed operators like Reliance Jio to deploy nationwide advanced networks and Airtel to upgrade its existing infrastructure.

Such duopoly is not limited to India's energy or telecom sectors alone but can be seen across several sectors.

The Indian aviation sector has historically been challenging, leading to the collapse or significant scaling down of several airlines (e.g., Kingfisher, Jet Airways, Go First). This created a void that strong players like IndiGo and the newly consolidated Tata Group capitalised on.

IndiGo's relentless focus on a single aircraft type (Airbus A320 family), efficient operations, high aircraft utilisation, and direct sales channels, allowed it to achieve a very low-cost structure, enabling competitive pricing and strong market share.

The Tata Group's acquisition of Air India and its subsequent merger (Vistara into Air India, AirAsia India into Air India Express) created a formidable second player with significant fleet size, network reach, and financial backing.

Vietnamese electric vehicle (EV) major VinFast has received advance export orders from Nepal, Sri Lanka, West Asia, and Africa. The orders will be shipped from the company's Indian subsidiary.

This was even before the inauguration of Indian subsidiary's US$ 2 bn plant in Tamil Nadu's Thoothukudi. VinFast plans to inaugurate the Indian facility by the end of July 2025.

While operations will begin shortly afterward, vehicle deliveries are likely to start by the upcoming festival season.

VinFast is fast-tracking its plans amid its rival Tesla's slower-than-expected entry into India with just one showroom. The move also comes at a time when India is fast emerging as a global exporter of automobiles, driven by government policies and expanding market access.

The government is encouraging car manufacturers to increase the share of exports from 14% now to 25% by 2030, through various initiatives like FAME, PM E-Drive, and the Production-Linked Incentive (PLI).

Apart from the leading MNCs operating in Indian automobile sector, Maruti Suzuki and Hyundai Motor India dominate the country's outbound trade, accounting for 43% and 21% of the export market, respectively.

Maruti Suzuki is aiming at a 20% increase in FY26 to take its total exports beyond 400,000 units.

Hyundai Motor India is eyeing a more modest 7-8% growth in FY26, making India its largest export hub outside South Korea.

While Maruti exports its models Jimny and Fronx to even a mature market like Japan, Hyundai targets Saudi Arabia, South Africa, Mexico, Chile, and Peru.

Cement manufacturing is a capital-intensive industry, requiring huge investments in plants, machinery, and logistics.

The largest players like UltraTech, ACC and Ambuja benefit from significant economies of scale, allowing them to produce cement at lower per-unit costs, which smaller players struggle to match.

These dominant companies have built vast and well-established distribution networks across the country, enabling them to reach a wide range of customers, from large infrastructure projects to individual builders, more efficiently than smaller or newer entrants.

So, it's hardly surprising that the companies with the largest market share are cornering the giant share of profits in select sectors.

I call them sectors where the 'winner takes it all'.

Such companies do not just deliver record profits. But beneath the surface of this profitability boom lies a structural shift that's going unnoticed by most.

It's not just operational efficiency or global tailwinds driving earnings. It's consolidation.

And the most telling evidence of this power shift comes from a single number: the Herfindahl-Hirschman Index (HHI).

What is the Herfindahl-Hirschman Index (HHI)?

The HHI, is a widely used measure of market concentration. In simple terms, this is a way to quantify how competitive (or monopolistic) an industry is.

Albert O Hirschman developed an early version of the index in the 1940s, which was later refined and popularised by Orris C Herfindahl.

The tool is now commonly used by antitrust regulators, to assess whether a market has become too dominated by a few large players.

In FY25, the average HHI across eight major Indian sectors jumped to 2,532, entering the 'highly concentrated' zone for the first time in over a decade.

This is a notable increase from 1,980 in FY15 and 2,167 in FY20. This trend suggests growing pricing power, shrinking competition, and rising profit margins for the dominant firms.

Sectors that have barely two to three large companies capturing the bulk of market share, growth and margins have historically seen the biggest representation on the benchmark indices too.

For instance, as this chart shows, over a 70-year period, the stocks with the largest market capitalisations in the US shifted from the telecom sector to oil and gas to retailing to technology to digitisation.

Stocks with the Largest Market Capitalisation in the U.S. (1950-2023)

Such dominant (winner takes it all) companies, with fewer competitors, often have greater market power or pricing power.

This means they can influence prices without immediately losing significant market share, allowing them to maintain healthier profit margins.

Moreover, concentrated sectors typically have high barriers to entry, such as massive capital requirements, complex regulatory hurdles, established brand loyalty, or proprietary technology.

These barriers protect existing players from new competition, preserving their market share and profitability.

Finally, the 'winner takes it all' stocks benefit significantly from economies of scale. They can produce goods or services at a lower per-unit cost due to their size, leading to higher efficiency and better profit margins than smaller, less efficient competitors.

Therefore, over the coming decade, the 'winner takes it all' stocks or the monopolies and duopolies could dominate the benchmark indices in Indian stock markets too.

Keeping a watchlist of such stocks using the Equitymaster Screener can be useful when the valuations become attractive.

Happy investing.

Warm regards,


Tanushree Banerjee
Editor, StockSelect
Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst)