Correction done, stock picking begins: TCG Asset’s take on Indian equities

After a volatile earnings season and a sharp correction in mid- and small-cap stocks, Shahzad Madon, MD and CEO of TCG Asset Management, believes the Indian equity market is entering a phase where selective stock picking matters more than broad market calls.Speaking to CNBC-TV18, Madon said the current earnings season has been encouraging so far, especially after several weak quarters. While markets have reacted sharply to even small disappointments, he feels the overall tone of results is improving.

According to him, the latter part of the year could be better, particularly for mid- and small-cap companies that have already gone through deep price corrections. His firm’s transformative growth portfolio focuses on select small-cap stocks with the potential to deliver outsized returns over time.

“So far so good, things looking a lot more interesting. We look forward with a fair deal of optimism, especially on stocks in our portfolio, which have held up rather well in the fairly brutal market correction.” Madon said.Read Here | Siddhartha Khemka remains positive on banks, upgrades Bandhan Bank to buy

Madon remains focused on smaller companies through his long-term, buy-and-hold approach. He said the recent correction has made valuations more attractive, but opportunities are highly stock-specific rather than sector-wide.
On DB Corp, he noted that short-term weakness was largely due to seasonality in advertising revenues, while the underlying business remains stable over a longer time frame.In financials, holdings such as IDFC First Bank and Equitas Small Finance Bank continue to reflect an improving earnings cycle. He believes the worst phase for several lenders is likely behind them, even as markets remain cautious after the reaction to Bandhan Bank results.

In the mid-cap IT and technology space, Madon said Intellect Design Arena is a financial services product-focused company, making it structurally different from traditional IT services firms. He noted that the company has been around for a long time and continues to see steady growth with rising client penetration.

Its products are well accepted across the financial services industry, and the increasing base of installations is leading to higher recurring revenues, which adds stability to earnings. Madon added that this trend should also support margin expansion over time. While the stock price may remain volatile in the near term, he believes earnings are likely to grow steadily, and his investment thesis on the company remains unchanged.

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