Indian equity markets are navigating a consolidation phase marked by global uncertainty, uneven participation, and cautious investor sentiment, according to PL Asset Management's latest PMS Strategy Updates and Insights report. The asset manager highlights that while equity indices have maintained resilience, this performance has been largely driven by gains in a limited set of large-cap stocks, with broader market participation remaining notably weak.

Market Breadth Concerns Persist

The report emphasizes persistently weak market breadth over the past year, with only a small proportion of stocks consistently trading above long-term moving averages. This pattern indicates underlying fragility beneath headline index levels, suggesting that while Indian equities remain fundamentally sound, they have yet to enter a durable, broad-based uptrend.

Style Factor Performance Reflects Selective Environment

Style factor performance in 2025 has reflected the selective market environment currently prevailing:

The performance divergence indicates that while some investor interest exists, particularly in value stocks with relatively attractive valuations, the market has not entered a broad risk-on phase.

Precious Metals Outperform Equities

Against this backdrop, precious metals have significantly outperformed Indian equities during the period. Gold and silver have benefited from multiple supportive factors:

• Sustained central bank demand
• Currency volatility concerns
• Ongoing geopolitical uncertainty
• Industrial usage demand for silver amid supply constraints

PL Asset Management notes that Indian equities are currently trading near multi-cycle relative lows when compared with gold and silver. Such valuation gaps between financial and real assets have historically coincided with periods when diversification helped investors manage volatility and preserve capital.

Sentiment Indicators Show Gradual Improvement

Despite current challenges, market sentiment indicators tracked by the firm suggest that pessimism may have eased. Internal risk and sentiment metrics point to gradual improvement, supported by stable domestic macroeconomic data and a better earnings outlook. The high-low beta spread turned positive toward the latter part of 2025, signaling early signs of returning risk appetite, though recovery is expected to remain gradual.

Strategic Outlook and Portfolio Positioning

Siddharth Vora, Head of Quant Investment Strategies and Fund Manager at PL Asset Management, emphasizes that market outcomes are currently being driven more by asset allocation decisions than by broad equity rallies. He notes that gold and silver have continued to play a stabilizing role during periods of equity consolidation.

Looking ahead, the firm expects Indian equities to benefit from a gradual recovery in earnings and potential global capital rotation as valuations in overseas markets normalize. However, PL Asset Management maintains that diversified portfolios remain important until market breadth improves and volatility moderates. The firm also highlighted that its AQUA (Adaptive Quantitative Unbiased Alpha) strategy demonstrated relative resilience during the recent consolidation phase, marginally outperforming its benchmark in December amid weak market breadth.

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, following a volatile earnings season and sharp correction in mid- and small-cap stocks. Speaking to CNBC-TV18, Madon expressed optimism about current market conditions and his firm's portfolio performance.

Earnings Season Shows Improvement

Madon described the current earnings season as encouraging, particularly after several weak quarters. While markets have reacted sharply to even minor disappointments, he noted that the overall tone of results is improving. The CEO believes the latter part of the year could be better, especially for mid- and small-cap companies that have already experienced deep price corrections.

"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 stated.

Investment Strategy and Portfolio Focus

TCG Asset Management's transformative growth portfolio concentrates on select small-cap stocks with potential to deliver outsized returns over time. Madon maintains a long-term, buy-and-hold approach focused on smaller companies, noting that the recent correction has made valuations more attractive. However, he emphasized that opportunities are highly stock-specific rather than sector-wide.

Sector-Specific Holdings and Outlook

The fund manager provided insights on several portfolio holdings across different sectors:

Technology Sector Perspective

Regarding Intellect Design Arena, Madon highlighted its distinction as a financial services product-focused company, making it structurally different from traditional IT services firms. He noted the company's long-standing presence in the market and continued steady growth with rising client penetration.

Key advantages of Intellect Design Arena include:

• Well-accepted products across the financial services industry
• Increasing base of installations leading to higher recurring revenues
• Added stability to earnings from recurring revenue model
• Expected margin expansion over time

Madon acknowledged that 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.

Market Outlook

The CEO remains cautious about the financial sector despite his positive outlook on specific holdings, particularly after market reactions to recent results such as Bandhan Bank. However, he maintains that the worst phase for several lenders is likely behind them, supporting his continued focus on select financial services companies within his portfolio.