Insurance, private banks, and AI-led IT: George Thomas picks value spots in a volatile market

Time of India

3 days ago

In this edition of ETMarkets Smart Talk, we speak with
George Thomas
, Fund Manager – Equity at
Quantum AMC
, to decode the current market dynamics and uncover where value may still be hiding amid rising volatility.
As foreign institutional investors turn cautious and IPO activity gains momentum, Thomas explains why
insurance companies
,
private sector banks
, and AI-led opportunities in the IT space could offer attractive entry points.
He also shares his views on
earnings visibility
, sector resilience, and why retail investors need to stay valuation-conscious—especially in the overheated
small and midcap segments
. Edited Excerpts –
Q) Thanks for taking the time out. The second half of 2025 started on a volatile note. How are you looking at the markets? One of the reasons could be FIIs selling, which continues in July.
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A) Demand environment has so far not shown a broad-based pickup. Valuations are at or above fair zone in many sectors, which leads to volatility on slight deviation from expected earnings trajectory.
Additionally, IPO market has a strong line up which could also limit a stark rally in the market. Considering the impact of ongoing global dynamics on interest rates, trajectory of FII flows is hard to predict in the medium term. Flows have been reasonable, supported largely by the DIIs.
Interest rate cuts, reasonable spread of monsoon, low base of FY25 & income tax rebates are likely to support earnings growth through the year.
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Though potential returns over the medium term could be lower than historic periods, they are likely to remain reasonable.
Q) IPOs have picked up recently, but EY report highlighted that Indian IPO activity in the first half of 2025 recorded 108 deals raising US$4.6b, demonstrating market resilience despite a 30% decline in transactions.
A) In many cases, IPOs are launched at the most favorable part of the business cycle and launched at full valuation.
Though there is reasonable supply awaiting to hit the markets, median stock returns of recent IPOs are muted which clearly shows a moderation in investor interest. We generally don't participate in IPOs as odds are skewed in favor of the seller.
Q) What is the initial sense you are picking up from the June quarter results, which have started to come out?
A) The result reason is progressing in line with expectation. Demand environment is not showing a stark change from the muted trend in prior quarters. Input cost moderation is helping profitability in many sectors.
Among major sectors, asset quality trends remain reasonable in banks. Though deal wins remain reasonable and environment is stable, IT continues to witness moderate demand environment.
Autos have seen muted domestic volume growth, partly due to inventory correction in the channel.
Q) Is the current equity market rally largely liquidity-driven, or are there sufficient earnings fundamentals to back the optimism?
A) India is likely to see a reasonable market performance backed by the domestic flows and earnings recovery. Muted earnings in the recent year have created a low base for earnings.
The recent interest rate cuts, above average monsoon and moderate inflation are likely to support the earnings trajectory through the year.
Q) SIPs crossed Rs27K – what does it talk about the retail investor behaviour change?
A) Share of SIP in overall AUM has increased from 10.5% in FY19 to 20.4 % of Mutual Fund AUM as of FY25. Large part of investors has understood the importance of long-term orientation.
Recent volatility has clearly given an indication that markets aren't always linear. Considering the low share of equity in household financial savings, the trend can sustain for the long term.
Q) Where are the pockets of opportunities coming from?
A) Private Sector Banks & Insurance offers reasonable value at the current juncture. Though banks could see margin pressure in the near term, favorable credit environment and a potential pick up in credit growth can support banks in the current year.
Some of the insurance companies which are facing near term transient issues are also offering good value. IT sector has the potential to positively surprise on earnings as enterprises are likely to accelerate IT spending with the increased proliferation of new technologies like AI.
As new technologies proliferate, IT service companies are likely to benefit from implementation and integration related work.
Q) How should one play the small & midcap space?
A) As flows in the recent times are largely contributed by retail investors and DIIs, few segments within small & mid cap space are trading at extreme valuation.
Strategies which are cognizant of valuation and focused on bottom-up analysis are likely to outperform in the current environment.