The exuberant media

Business journalism has always shaken and stirred stock markets

N Chandra Mohan

N Chandra Mohan

The spotlight is again on the role of the business press. The Indian Express frontpaged a story that the leading pink dailies indulged in “breathless buy-buy prose” in pitching for investments in the now discredited Cyberspace Infosys. In another instance, an anti-Unit Trust of India campaign was believed to have been launched by a leading investment magazine which urged its readers to get rid of their US-64 units ASAP.

The natural inclination of most readers to such news is to bash the business press for its questionable ethics. Business journalists are believed to write to an hidden agenda; and quite often, are vehicles for planted or highly motivated stories. A more common perception is that their stories often set the stage for market moves. And that the more influential writers among them indeed are major players.

The demand for a code of conduct arises in this context. Many people wonder whether business journalists should at all recommend particular investments in the stock markets or give specific advice on how readers should manage their investment portfolios. When the action at the bourses is more akin to a casino or race course, should the press at all indulge in punting? Is the Indian experience any different from the rest of the world?

The main difficulty with such thinking is that there are no shining examples anywhere else. The US, for instance, is a country where the tradition of business journalism is more mature or advanced than in India. But Mr Howard Kurtz, author of The Fortune Tellers:Inside Wall Street’s Game of Money, Media and Manipulation, feels differently and considers financial journalists to be movers and shakers on Wall Street.

According to him, they make things happen instantaneously, and their impact is gauged not by subjective polls but by the starker standard of stock prices. In other words, like in India they too indulge in “breathless buy-buy prose” or sell-sell advice, moving the markets in a big way. The charge of insider trading has stuck to some of them; some US financial journalists are also being sued for their wrong investment advice!

All of this does not whitewash what the pink dailies have done to Cyberspace Infosys. Just because it happens in the US, it does not justify the doings of their counterparts in India. The point actually is a more disturbing one which the code of conduct types do not consider — notably, that it is impossible to separate the role of the business press altogether from speculative manias, crashes and panics in stock markets.

The fact is that the business press is an integral element of speculative bubbles around the world. That they not only set the stage but also instigate the market moves themselves. That this has been going on since the advent of newspapers. That the business press in fact are “fundamental propagators of speculative price movements” —- all of this has been rigorously argued by Professor Robert Shiller in Irrational Exuberance.

The reasons behind this phenomenon are not necessarily perfidious. They relate to the compulsion to make news interesting on a daily basis. When there is so much competition for readership, a good lead story on stock market movements is bound to rivet attention. “Nothing beats the stock markets for the sheer frequency of potentially interesting news items”, felt Prof Shiller, as this brought in the “most loyal repeat customers”.

Back to India, the rapid spread of the equity culture since the 1990s underpinned a boom in business dailies. Most general newspapers beefed up their business sections, an integral element of which has been the stock pages and regular columns by investment analysts. The more specialised pink dailies of course had a more extensive coverage of investor-related material which appeared in the beginning of the week.

Satisfying the hunger for stock market stories is indeed the basis on which most publications planned their business coverage. No business journalist is pulled up for missing a corporate story but the phones start burning if the stock quotes are wrong or the previous days quotes have been carried by mistake! No amount of apologies are sufficient as it’s possible that losses have been incurred with such a goof up.

Serious business journalism cannot therefore altogether ignore this seemingly insatiable hunger for stock market-related information and stories. Where does one put one’s money? Which stocks are the hot ones to pick up? Rare is the journalist who does not have to confront such questions from even ordinary people. The widespread impression is that the journalist is an expert who is privy to inside market gossip or tips!

Despite their superficial skill-base, quite a few business journalists do dabble in playing the stock market guru, dispensing their two bits of wisdom on which stocks to pick and choose from. That is a dangerous game to play as the Cyberspace Infosys episode illustrates. The defence of such action that the subsequent denouement could not have been foreseen is a weak one. The question still remains whether one should be doing such things at all.
Instead of refraining from making any recommendations perhaps a better course of action is to lay out the pros and cons of particular stocks or funds, leaving it to the reader to decide what to do. This could entail a rigorous rating of issues on a scale for their safety, prospective returns, risk factors and other relevant parameters — as is being done in the country’s first and possibly best business magazine.

The perfidious element can be reduced if business journalists reported their portfolio (if any) to the immediate boss and refrained from writing on such issues or concerned companies. This would minimise conflicts of interest and considerably enhance the credibility of the publication. But no matter how foolproof such a system is, the scope for abuse undoubtedly exists in a big way. But the link between business journalism and stock market moves is a reality that cannot be wished away.