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Ugly Side of the Street

Corporate results season sees the emergence of one of the most outrageous forms of predictions

Indian stock markets (or perhaps just India’s investing media) is in the grip of someone called Mr Expector, whose behaviour is now almost as strange as the famous Mr Market. Investment homilies often refer to someone called Mr Market, a character that embodies the market. The originator of Mr Market was the great Benjamin Graham, many of whose investing parables have a person called Mr Market. Invariably, Graham’s Mr Market is an unstable, neurotic character who is susceptible to every irrational knee-jerk reaction that investors are capable of.

While reading news reports and viewing business news about the stock markets, I have recently detected a similar character whose sole task seems to be to go around expecting mutually contradictory things to happen simultaneously. As I am writing this, Mr Expector has excelled himself with some amazing expectations about the quarterly numbers of both Reliance Industries and Bharti Airtel. In both cases, the pink newspapers as well as the business channels were victims of Mr Expector’s conspiracies. He told a certain set of people that both these companies’ quarterly numbers will be good and another set of people that the numbers will be bad. When the results were actually announced and the stocks tanked, one part of the media said that the stocks had sunk because the numbers were as the market had expected and another said that the reason the stocks had sunk was that the numbers were not what the market had expected.

Earlier in the week, there was an almost identical situation when Tata Steel numbers were announced. Again, some commentators held that the stock dropped because the markets’ expectations were correct and some said it had dropped because the expectations were not correct.

Of course, it is entirely possible that Mr Expector’s real purpose in life is something else, except expecting. He seems to expect entirely in hindsight. We never see him standing up tall on the TV screen, head held high and chin firm, saying that this company’ results are to be announced and this is what I expect. Instead, he seems to hide somewhere till the numbers are actually out. Then, after Mr Market has done his bit, Mr Expector comes out and reveals what he had expected, or rather what he would have expected had he been available to expect before the event.

There are two explanations for this strange behaviour. One, Mr Expector doesn’t really expect anything. I suspect that he probably doesn’t even exist. He is simply created out of thin air every time someone has to explain how or why something has happened. No one says, ‘I expected this’; they’ll all say, this was what the market expected. He is the same as the so-called ‘consensus view’, at least as it is practiced in the Indian markets. Everyone has a different list of who all contribute to a consensus and whenever this consensus view is quoted publicly, there is no enumeration of exactly who was doing the consensus building and how the consensus was achieved, or calculated.

And if expecting is to be done only in hindsight, then I suspect that every one of us can expect as well as the best professional expectors.