Bonds, gold likely to deliver steady returns in CY25: Shiv Goel, Bonanza

September 2025 quarter (Q2-FY26) earnings are expected to post moderate headline growth, led by auto, FMCG, and select banks, said Shiv K. Goel, Director of Bonanza Portfolio in an email interview to Sirali Gupta. He added goods and services tax (GST) could enhance corporate profitability. Edited excerpts:

Are the recent GST measures sufficient to improve India Inc's P&L?

GST reform is expected to boost consumption growth by 40–50 bps in H2FY26 and enhance corporate profitability through higher volumes. Beyond demand, companies stand to benefit from improved inventory turnover, faster receivables collection, lower input tax costs, and streamlined compliance, which together could ease tax liabilities and strengthen balance sheets. That said, the scale and sustainability of these gains will vary by sector and depend on input-cost trends following GST reforms.

What are your expectations for the upcoming Q2 earnings season?

Q2 earnings are expected to post moderate headline growth, led by auto, FMCG, consumer durables, and select banks. Supportive measures from the government and RBI—such as rate cuts and GST reforms—should help revive sentiment despite global headwinds. Consumer sectors are likely to benefit from festive demand and GST-led volume uptick, though high input, energy, and transport costs could weigh on margins.

 

In banking, modest improvement is expected as credit growth strengthens and asset quality stabilises, even as margin pressures linger. The renewable energy sector should report strong growth on the back of capacity additions and incentives. Conversely, IT companies may see flat to low-single-digit growth due to fewer large deals, though firms with greater exposure to digital, cloud, and AI services could fare better.

With the US Fed cutting rates, do you expect the Reserve Bank of India (RBI) to follow?

The Fed’s action has opened room for global central banks, but the RBI is expected to move cautiously. While moderating inflation offers some headroom, currency stability and crude prices remain key concerns. RBI is likely to prioritise policy credibility over mirroring the Fed. A rate cut is possible, but more likely in a calibrated, modest reduction later this year, after greater clarity emerges on inflation and external risks.  ALSO READ | Markets eye an inflection in earnings downgrade cycle: Trideep Bhattacharya

How should investors diversify their portfolios amid current uncertainty?

With slowing global growth and potential rate cuts, bonds and gold are expected to deliver steady returns in CY25. Recent gold’s surge to new highs underlines its value as a safe-haven and inflation hedge, while government bonds and high-quality debt offer stable income and protection against equity volatility. Equities may stay choppy amid stretched valuations and uneven earnings, making selectivity crucial. A balanced allocation to gold for crisis protection, bonds for stability, and quality equities for growth can help build resilient portfolios in CY25.

How do you assess current market valuations?

Equities are trading at a premium to historical averages, driven by India’s strong growth narrative and resilient domestic demand. However, valuations indicate that much optimism is already priced in, while earnings growth has lagged the market re-rating. This leaves markets vulnerable to corrections if results disappoint or global liquidity tightens.

How do you currently position India among EMs when it comes to attracting FII flows?

India continues to attract foreign investors on the back of robust macro fundamentals, political stability, and strong domestic demand. However, steep valuation premiums, moderating earnings growth, and recent rupee weakness have made FIIs more selective, with some shifting to cheaper markets. While India’s structural growth story remains intact, near-term flows are likely to stay volatile, guided by earnings quality, currency stability, and global liquidity trends.  ALSO READ | GST reforms a mini budget; market risk greater in mid, smallcaps: S Naren

What would be your recommended approach towards mid-cap, small-cap, and micro-cap stocks?

While mid and small-cap stocks have seen strong gains, valuations in many segments now appear stretched. Investors should adopt a selective approach, focusing on quality stocks. Micro-caps demand even greater caution due to higher liquidity and corporate governance risks. A staggered investment strategy with disciplined allocation is advisable over chasing momentum.

What advice would you give to retail investors looking to participate in the current IPO frenzy?

While IPOs are exciting, investors need a disciplined approach. Prioritise studying the company's financials, business model, and use of proceeds over relying on grey market premium or market buzz. Watch out for red flags like a high offer-for-sale component, limited promoter holding, or valuations stretched beyond peers. Retail investors should avoid using borrowed money due to potential post-listing volatility.