Dharni Capital Services Ltd Management Discussions

GLOBAL ECONOMIC REVIEW

During the disinflation period of 2023-24, the global economy showcased remarkable resilience, maintaining robust economic activity. Factors such as increased government spending, undiminished household consumption, and an unforeseen expansion in labour force participation have contributed to this steady growth. According to the April 2024 World Economic Outlook publication, titled ‘Steady but Slow: Resilience amid Divergence, global growth is at 3.1% in 2023 and is projected to continue at the same pace in 2024 and 2025. The pace of expansion is low by historical standards due to persistent challenges, which include near-term factors such as high borrowing costs and withdrawal of fiscal support, alongside longer-term effects stemming from the COVID-19 pandemic and geopolitical tensions. The unabating conflict between Russia and Ukraine and the war between Israel and Gaza seeded the possibility of sustained disruptions to regional trade in food, energy and other commodities while, the slowdown in the Chinese economy posed a risk to the pace of overall global economic activity.

The outlook for global growth remains modest, with estimates projecting a continuation of the current pace in the coming years. Inflation is expected to gradually decline, with Advanced economies returning to their targets sooner than emerging markets. However, the forecast for global growth five years from now is at its lowest in decades, suggesting a slowdown in the convergence of living standards among countries.

INDIAN ECONOMIC REVIEW

In the fiscal year 2023-24, India achieved significant economic milestones amidst global adversities. Despite a slowdown in the global economy, driven by high interest rates and geopolitical tensions, India demonstrated remarkable resilience, maintaining its position as the worlds fifth-largest economy. Indias GDP exceeds estimates, grows at 8.2% in FY2024. This growth was propelled by robust domestic consumption, increased government capital investment, a strengthened financial sector, and stable monetary policies. The RBI has raised Indias real GDP forecast for FY2025 to 7.2% from 7% earlier on prospects of improving rural and urban demand condition buoyed by monsoon forecast.

INDIAN ECONOMIC OUTLOOK (%)

Service sectors exhibited strong performances. The service sector remained resilient, with the Purchasing Managers Index (PMI) consistently above 50, indicating sustained expansionary activity. Additionally, GST collections surged by 11.7%, reflecting robust domestic demand.

However, global geopolitical tensions, notably between Russia and Ukraine, led to elevated oil prices and grain scarcity, exacerbating global inflation. This situation affected India, prompting higher inflation rates. To counter this, the Reserve Bank of India maintained a tight monetary policy, keeping key policy rates unchanged at 6.5%, effectively managing inflation within the tolerance band, with the average CPI inflation at 5.4% during the fiscal year.

MONEY AND CAPITAL MARKET

Between April 2023 and March 2024, the National Stock Exchange (NSE) saw a significant surge in the equity cash segments average daily turnover, increasing by over 89%, indicating strong investor demand for equity investments. The Nifty index also rose by 28.6% in FY2024. The IPO market was vibrant, with proceeds totalling US$ 7.89 billion in CY 2023, nearly matching the previous years US$ 7.99 billion. This growth is driven by strong consumption demand, government capital expenditure, rapid digitisation, and supportive policies. Indias stock market briefly became the worlds fourthlargest in January 2024, with a market capitalisation of US$ 4.33 trillion. Additionally, in September 2023, JP Morgan announced Indias inclusion in its Global Bond Index-Emerging Markets Global Series starting in June, highlighting confidence in Indias growth potential, macroeconomic stability, and fiscal policies.

EQUITY MARKETS

The Indian stock market ended fiscal year 2024 strongly, with stocks reaching all-time highs and generating significant wealth for investors. Mid-small and PSU stocks were outperformers, while large- cap stocks also delivered multi-bagger returns. The Nifty 50 and BSE Sensex indices surged about 28.6% and 24.9%, respectively, showcasing market resilience. In November 2023, the market capitalisation of BSE-listed companies exceeded Rs. 333 lakh crore (US$ 4 trillion) for the first time, highlighting Indias growing global market prominence. The BSE Sensexs 24.9% gain in FY 2023-24 was the second-largest rise in five years. Strong economic growth, solid corporate results, and robust domestic and foreign institutional investor inflows fuelled the bullish trend. The IPO market also thrived, with 78 (mainboard) new issues. Regulatory advancements like T+1 and optional T+0 settlement cycles enhanced market efficiency and liquidity, while SEBIs reforms improved governance and investor protection.

MUTUALFUNDS

In FY2024, Indias mutual fund sector saw significant growth, reflecting changes in investor behaviour and market dynamics. According to AMFIs annual report, the number of folios hit a record 17.78 crore, with an investor base of around 4.46 crore individuals. Women accounted for 23% of investors, indicating broader demographic participation. The Assets Under Management (AUM) surged by 35% to Rs. 53.40 lakh crore by March 2024, up from Rs. 39.42 lakh crore the previous year. This Rs. 14 lakh crore increase marked the highest gain since FY2021, showcasing a shift in investor sentiment. Individual investors in equity, hybrid, and solution-oriented schemes drove this growth, representing nearly 58% of industry assets and 80% of folios by March 2024. Systematic investment plans (SIPs) further boosted growth, with monthly net inflows of approximately Rs. 19,300 crore in March 2024. For FY2024, SIP net inflows surpassed Rs. 2 lakh crore, with SIP assets comprising over 20% of industry assets and nearly 8.4 crore accounts. This robust growth highlights the maturing market and the pivotal role of mutual funds in wealth creation and financial planning.

Company Overview:

FINANCIAL PERFORMANCE

In FY 2023-24, the consolidated operational income surged from Rs. 470.14 Lakhs to Rs. 819.91 Lakhs, while the total revenue reached Rs. 925.94 Lakh a significant increase from Rs. 499.74 Lakh in FY 2022-23. During this period, Profit Before Tax (excluding extraordinary items) climbed from Rs. 159.77 Lakhs to Rs. 391.66 Lakhs. The Profit after tax for the year also saw a notable rise, amounting to Rs. 293.85 Lakhs, up from Rs. 119.06 Lakhs recorded in FY 2022-23.

CAUTIONARY STATEMENT

This document contains some statements about expected future events, financial and operating results of Dharni Capital Services Limited, which are forward looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that the assumptions, predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, actual future results and events to differ materially from those expressed in the forward-looking statements.