Consumption stocks to give positive returns but not outperform: Vikas Khemani

In a chat with ET Now, Vikas Khemani, CEO, Edelweiss Securities shares his views on the consumption space. Excerpts:

ET Now: What do you do with the consumption basket at large?

Vikas Khemani: Given the fact valuation is there and there is scarcity in those names and given the risk averseness most of the investors were or are right now--they are overweight in the consumer space-- but as environment is changing, portfolio realignment would happen. Some of theswe stocks are very expensive and overvalued; some of them are fairly valued.

Now, this is a similar situation to the 1997-99 period where you had consumption stocks getting into a fairly overvalued zone or expensive zone and also being overweight. We are in a similar situation and as the things turn back, one should go back and see how this stock did in the 1999 to 2001 period. These stocks did not deliver negative returns. They definitely delivered positive returns but they did not outperform the market.

A similar kind of pattern I see if let us say Indian economic outlook improves, economic growth comes back and if we start moving forward. In such a situation these stocks would deliver positive returns but they would not definitely outperform the market. So I feel that risk reward of remaining invested into consumption driven stocks would be lower as compared to other stocks. As I said there will always be stock specific sort of views, so there would be specific companies which will do well in that sector, outperform in that sector. Therefore the real challenge would be to pick up one stock which will outperform everyone else kind of stuff.