On August 19, 2020, India may see a surge in populist politics as it battles the world’s third-highest number of coronavirus cases, and poses a key risk for companies whose fortunes are closely tied to the economy, says J P Morgan Chase & Co. Analysts led by James R. Sullivan in Singapore have also noted that rising populism could impact market valuations, at least in part due to protectionist trade and foreign direct investment policies inhibiting growth. So, it is a justifiable concern for investors.
India is facing one of the world’s fastest growth of the epidemic while the business prospects remain bleak in spite of gradual lifting of the virus-related restrictions. In this situation, populist rhetoric is thriving, and the falling share of income of the lower and middle-income groups is likely to worsen this trend as per the analysts. Thailand and the Philippines are among other examples in Asia.
The S&P BSE Sensex’s 12-month price-to-earnings ratio hit a record earlier this month after the gauge rebounded 45 per cent from its March lows. Little room is left for economic missteps and greater risk is round the corner for cyclical stocks, especially those whose fortunes track the wider economy. They advise minimal or reduced exposure to sectors like financials, materials, and energy except for Reliance Industries. The focus must be given on consumer, services, and healthcare.
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