Consumption is two very distinct baskets, staples as well as discretionary. The company in general prefers discretionary consumption over staple consumption, said Gaurav Mehta of Ambit Asset Management.
"The reasons are two-folds. One, as the economy graduates from $1,700 per capita GDP to a much higher per capita GDP, you will see disproportionate amount of non-linearity in discretionary consumption against staple consumption which is going to only grow linearly," Mehta said.
At these valuations, the company do not see how staple companies can continue to deliver the kind of outsized returns that they have over the last few years, he said.
On smallcap stocks, Mehta said, natural correction is happening for the past four or five months.
“After the last three or four years of smallcap outperformance, there was a bit of euphoria, there was a sort of optimism that was being baked into smallcap prices and which is why the kind of run that you had in 2017, it was pretty indiscriminate, lots of relatively poor quality companies were also flying through the roof," he said.
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