FMCG stocks may well have rallied on Saturday, riding high on Budget announcements but Vikas Khemani, Founder, Carnelian Asset Advisors believes that the gains are short term in nature.
"I think as the market goes up, it will slow down as we saw in case of last couple of quarters," he told Moneycontrol in a post-budget panel discussion.
Khemani added that recent policy measures such as the relaxation of import tax could provide a temporary boost. "I think this current relaxation of the import tax probably might help that. But in my opinion, these are only short-term trades. Consumption is the best story for long-term," he added.
Consumer staples stocks gained after Finance Minister Nirmala Sitharaman announced that no income tax will be levied on income of Rs 12 lakh.
The Nifty FMCG index was higher by 4 percent, which is the most in seven months. FMCG players like Godrej Consumer Products, ITC, Varun Beverages and Hindustan Unilever also gained around 4 percent,
Currently, most consumer stocks continue to trade at high valuations. Khemani noted that when it comes to investing in the sector they continue to follow selective investments. "Most consumer stocks are quite expensive and hence we don't want many, but we have select stocks which we like. The idea is to kind of look at stories with respect to volume favour," he explained.
Structurally speaking, he added, many consumption stocks have not performed in the last 5 years and may not perform in the next 5 years because of their poor valuation and also potential disruption happening in those large big names.
On the other hand, smaller consumer firms present opportunities. "Smaller consumer companies have been growing faster and they are also getting sort of better risk rewards," he added.
For FY2025, the finance minister announced a revised capex of Rs 11.2 lakh crore. On whether there is some disappointment on capex numbers, Khemani suggests that the numbers are in line with the expectation and ultimately it will depend on how the execution happens. "There are different ways of spending money on CAPEX. Today, a lot of infrastructure, CAPEX is happening through SPVs which are not necessarily for the government balance sheet, but on a user-to-pay basis," he added.
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