TCG Asset Management CEO Sees Opportunity in Small-Caps After Market Correction
TCG Asset Management's CEO Shahzad Madon sees the Indian equity market entering a stock-picking phase after recent corrections in mid- and small-caps. He reports encouraging earnings season results and believes the latter part of the year could be better for smaller companies. His firm focuses on select small-cap stocks through a long-term approach, with holdings including DB Corp, IDFC First Bank, Equitas Small Finance Bank, and Intellect Design Arena showing resilience during the market correction.
*this image is generated using AI for illustrative purposes only.
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:
| Sector | Company | Key Points |
|---|---|---|
| Media | DB Corp | Short-term weakness due to seasonality in advertising revenues; underlying business remains stable |
| Financial Services | IDFC First Bank, Equitas Small Finance Bank | Reflect improving earnings cycle; worst phase likely behind them |
| Technology | Intellect Design Arena | Financial services product-focused; structurally different from traditional IT services |
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.
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