If we go down the memory lane, we had companies like Bombay Burmah, Mukand etc in the Sensex - and they have now been reduced to 'small caps'. Just three years ago, we had companies like Tata Power, HPCL, MTNL, Nestle, Castrol etc in the index. While these companies are still fairly large, they have been overtaken by nimbler companies like Bharti, RCom, Maruti etc.

 

You can check the complete history of Sensex replacements here

 

Now take a look at the current index constituents. Which are the companies in this list which would probably drop off in the next 3 years? These should be the companies which would grow at a slower rate than the other companies. My picks -

 

BAJAJ and HERO HONDA: These are 15% CAGR companies. And people in India would probably go purchase cars rather than bikes.

 

GUJ AMBUJA & ACC: Single commodity players generally don't last for long because of demand/supply issues.

 

DR. REDDY, RANBAXY & CIPLA: Indian pharma companies are not innovators. They are just a bunch of reverse-engineers.

 

REL ENERGY: Another 15 - 20% CAGR company.

 

SATYAM: A little more squeeze from the rupee and Satyam will drop down to a 15% CAGR company. Also a good takeover candidate (by IBM, EDS etc).

 

We will get to the replacement companies later.

 

Similarily as media companies cross the billion dollar threshhold they would qualify for the same. From my memory except for Zee, Sun, Dish TV and Tv18 there are no other billion dollar companies in the media sector!

 

We idscussed some of these names in this thread:

 

 

I am not sure about the innovation part. I am not sure about their reverse engineering

 

There are 2 types of pharma companies -

 

- The innovators

- The Generics Players.

 

The innovators research the disease for years, experiment on chimpanzees and humans and finally file release the drug in the market. They file for patent protection and earn in billions if the drug turns out to be a blockbuster like Lipitor or Viagra. The main innovator companies are Merck, Pfizer, Sanofi Aventis etc.

 

The generic players research the existing drug (rather than a disease). They literally find out what the composition is and then re-create the drug. After the patent for the innovator drug expires after a few years, the generic companies like Ranbaxy, Dr. Reddy & Teva (of Israel) are allowed to sell the much cheaper variants of the innovator drugs in the market.