Tragedy in Close-up, Comedy in Long-shot: A Matter of Perspective

“Is Infosys closing down?” asked my friend Swami as we met for our weekend coffee today.

I had heard of nothing like that, and so obviously was all ears to him. Not sure why he asked, even my broker friend Jigneshbhai said, “What nonsense? Where did you hear that?”

“No – looking at the extreme reaction to its results yesterday, it looked like everyone was selling their stock as if the company was going to either go bankrupt or close down. So I thought I will check with you, as you guys are knowledgeable about such things. Does it have a lot of unpaid debt?” explained Swami.

Jigneshbhai was ready to answer this one as I wasn’t quite so sure. “No debt. They never had any. And I don’t think they ever will take any.”

“So are they making losses? Or do they have some liabilities from customers? Or they are not getting business from customers? What’s the problem?” asked Swami, not quite sure why people were selling the stock.

“No losses. Their profit margins are almost 30%. They grew by 22% last year” the well read Jigneshbhai explained.

“So then what’s the problem?”

“Well, they did not meet profit expectations that they had promised” said Jigneshbhai. “They had promised an earning of Rs.147 and they earned some Rs.145.5 per share. And they said next year may not be great. Every one expected them to grow by 12-14%, they said it would only be 10% max. So they did not meet expectations of investors.”

“Hmm..Got it now. So they are not performing? Should I also sell it now?” Swami questioned.

“Well, I don’t know. That depends on you and what your perspective is” said Jigneshbhai, in a cryptic manner.

“I don’t understand. Why do you have to talk in riddles all the time? Tell me clearly, yes or no” demanded Swami, clueless about what perspective means.

“I cannot tell you that. I wish I had simple answers. You decide for yourself. I told you it is a matter of perspective” continued Jigneshbhai, still not ready to solve Swami’s quandary.

There was a silence for a while. I thought Swami had given up on Jigneshbhai, and vice versa.

But then, my broker friend suddenly got up and said, “Charlie Chaplin had said once that life is a tragedy when seen in close-up, but a comedy in long shot. I don’t know the answer to your question. But if you think about markets like that, perhaps, you may get an answer. Specially when such so-called tragedies occur. After all, what you see is a matter of perspective.”

Leaving us perplexed, Jigneshbhai finished his coffee and walked away.