I am betting on a Black Swan event in India. Are you?

You wake up one morning to breaking news which, incredulously, goes thus: Varun Gandhi is the new Prime Minister, fully backed by Sonia, Rahul and Priyanka!

Before you gather your wits, comes another: Kishore Biyani buys out Mukesh Ambani’s business empire in an all-cash deal!

Then another: Greece topples Germany as the new economic superpower of Europe, the drachma replaces the euro!

To be sure, there’ll be few left breathing at the turn of events.

But what’s the common thread to the hypothetical events? All have very low predictability but are massive in impact. Or, they are Black Swan events.

More important, however, is the logic of the Black Swan: what you don’t know is far more relevant than what you do.

Precisely what stock markets thrive on. Be it the Lehman Brothers bankruptcy, the default and exit of Greece from the euro, the spike in Italian bond yields to an unnerving 7% not so long back, the outcome in France where, for the first time in almost two decades, an incumbent president lost elections to a Socialist.

All these can be called Black Swans that have shaped and will continue to define both global and local macros and, therefore, the stock markets. After all, bourses are driven by animal spirits which, in turn, take cue from evolving political ecosystems.

Three years back, at the height of the Spanish construction boom, when 20-something, self-styled tycoons sped around in Ferraris, no Spaniard worth his peseta could have foreseen the turn of events of today, where rioting and looting, triggered by all-time high unemployment of over 25%, are commonplace.

Because no one could see this coming, it is a Black Swan event.

Cut to India now.

Pick up any financial daily and you will see reams devoted to India being in the throes of a forex crisis with a current account deficit of 4% of GDP; of how export and import growth of under 4% in April makes the country a washout case; how GAAR and mindless policy activism have dented Brand India; how bond yields will continue to stay at elevated levels of 8.5% plus due to the government’s ambitious borrowing programme; how headline inflation will shoot up again to 9% plus if the paddy lobby has its way and minimum support price for paddy is hiked by 16%; how diesel subsidies will continue to play havoc with any kind of fiscal consolidation; how a negative 3.5% IIP for March is a precursor to worser stuff; how bad loans in India’s banking system are at an alarming 3% levels; and, how passenger car sales growth in April, at barely 3.4%, is the lowest in a decade.

India bashers are right in redlining all of that. But because everyone is writing off the country, expecting it to do no better than say 7% GDP growth this fiscal, it ceases to be a Black Swan.

However, remember what Nassim Nicholas Taleb says in his book, Fooled by Randomness: “The highly expected not happening is also a Black Swan”.

Now what if our ‘lame-duck’ Prime Minister bites the bullet, calls the bluff of his allies and fast-tracks pending reforms on insurance, retail, aviation, power distribution et al, in the winter session of Parliament?

What if Mamata Banerjee reinstates Dinesh Trivedi as the railways minister and supports not only fare hikes but calls for privatisation of the Indian Railways?

Hard to credit Mamatadi with such foresight? Difficult to believe we can get back to  9% GDP growth in the next one year? Impossible to imagine the Nifty high of 6300 plus, last seen in 2010, can be reclaimed this year?

Well, it is because almost no one barring a few believes this can happen that it may actually happen.

After all, if there’s one thing that repeated over and over again in the past many years, it is the Black Swan: the unexpected has happened and the expected has not.

In India, if the expected happens, the Nifty goes to 4200 or maybe even 3800. If, however, it’s a Black Swan, the index mounts 7000.

Place your bet.

For me, Black Swan it is.

Sanju Verma is the MD & CEO of Violet Arch Securities, formerly Alchemy Share & Stockbrokers.