Don't blame the Infosys whiz kids for the mindlessness of the markets. True, Infosys Technologies dampened investor sentiment on the stock market by reporting lower than expected earnings and issuing an earnings warning. Such quarter to quarter fluctuations are par for the course and ought to be expected at a time when the global economy has been disrupted and the SARS scare has hurt movement of people, especially in the IT sector. However, an 18.6 per cent growth in net profit in 2002-03 and an expected 13-15 per cent growth target for earnings per share for the current fiscal, even if below last year’s rate and below market expectations, is no reason for investors to cut and run. Some of this ought to have been factored into given market trends in recent months. Those who bet on the wild side fuelled the wildness in the market. Beyond exaggerated expectations and myopic nervousness, there may be other forces at work that were responsible for the crash in the sensex on Thursday. Most importantly, the anticipated payments problem was triggered, at least in part, by the prolonged weekend and closure of banks and financial institutions. Maybe Infosys timed its announcement wrongly and should have waited for the holiday week to finish. How much advance planning can corporates and institutions do when every now and then they are confronted by a spate of holidays? There is a serious case for reconsidering the number of closed working days we give ourselves. These holidays are often declared in the name of the people and on grounds of appeasing popular sentiment, when those who suffer most are in fact the people. The salaried and those whose income is not dependent on the number of working days in a year may escape, but all those who depend on selling goods and services and live on daily wages suffer. This negative impact of prolonged holidays has had a telling effect this week on the stock market. Another reason why one must place the market’s bearishness in proper perspective is that the overall state of the economy points to sound fundamentals. Not only is there evidence of a revival of economic growth, consumer spending and investment, but the economy has shown remarkable resilience in withstanding the negative impact of a global slowdown, especially in India’s major markets, a major war in a region centered around India’s main energy supplies, and a weak monsoon at home. Greater realism on the expectations front and a more balanced view of both general economic prospects and the fortunes of specific sectors like IT, should help stabilise the markets. The sensex nosedive on Thursday should not induce more negativism. Besides, responsible macroeconomic management can also help neutralise some of the negative expectations.
