BJP loses Karnataka Elections. Will Markets fall?

Lets see what our newspaper headlines can be tomorrow —

• Markets are cheering up the victory of Congress.
• Markets are cheering up due to ease of trade war between USA and China.
• Dallal Streets tumbles as Congress wins in Karnatka.
• Market tumbles as the crude oil continues to go up.

In Psychology, this is called Similarity Perception. The market generally goes up cheering BJP, so it is bound to go up again and vice versa. But when that doesn’t happen is labeled as an anomaly.

Before we talk about that, let’s see another case here —

Escorts Ltd.’s profit rose for the ninth straight quarter, meeting analyst estimates in the quarter ended March.

Net profit of the tractor maker rose 89 percent year-on-year to Rs 112 crore, Escorts said in its filing with the stock exchanges. That’s in line with the Bloomberg consensus estimate of Rs 109 crore.

If the results are good then it is supposed to appreciate right? But it kept falling and yesterday it cracked like anything. How is this possible? Now you will tell, results don’t matter, estimates do!

Well Escorts met their estimates. Say hi to Linchpin Theory!