The Wait for Clarity
The results season has begun. The first big one was from the tech major, Infosys. The markets clearly gave a thumbs down. Infosys has not been able to provide growth. More importantly, it has been unable to promise a return to growth. But, it has been working on improving efficiency and earnings have been relatively stable. The stability of earnings don’t seem to be under serious threat. A peculiar situation has arisen where the markets are punishing the tech companies mindlessly. This only goes to show how much our markets crave for earnings visibility and reliable guidance. If visibility and guidance are not on offer, the markets take the easy option of rejecting an investment and swiftly exiting that space. This is happening in the Indian markets right now. It would not be a surprise if the weight of technology stocks in the bellwether indices are cut in course of this year. The sell-side will show complete consensus in avoiding these stocks. Few sell-side analysts will be willing to stick their neck out. Strategists will hurry towards the exit. This sets us wondering how we are so closely oriented towards near-term thinking and gratification. Most of us profess to be long term investors while not even showing the patience to wait longer periods sitting on an investment. This again brings us to the difference between uncertainty and risk. If there is limited visibility of the future in a well managed business that has the adaptive ability, the business only faces uncertainty. But, most investors believe that the very business is at high risk. The coming weeks will test our own perspectives on risk and uncertainty. As results keep flowing, investors will need to make the cut between risk and uncertainty. The returns will flow only where these judgment calls are sharp and right.
The anxiety to be a part of every upside eventually becomes one’s downside.