Pune e-Stock Broking Ltd Management Discussions

Performance of Indian Stock Market in FY23-24

The Indian stock market indices have performed well in FY23-24, with the benchmark S&P BSE Sensex and Nifty 50 indices witnessing significant gains of 24.8% and 28.6% resp. 47 out of the 50 blue-chip companies in the Nifty 50 index surged by over 25%, and 5 stocks delivered more than 100% returns. Here are the key performance indicators:

The strong performance was driven by robust retail participation, foreign portfolio investor inflows, healthy macroeconomic indicators, and strong corporate earnings. As of March 2024, the Nifty 50 index traded at a forward P/E ratio of 20.7x, slightly below its 5-year average.

The Indian stock market also saw several record highs during the year, with the Nifty 50 crossing the 22,000 mark in January 2024 and reaching an all-time high of 22,525 in March 2024.

Overall, FY2023-24 was a very strong year for the Indian stock market, with the benchmark index and many blue-chip companies delivering exceptional returns.

Key events that affected the Indian stock market in FY 2023-24:

Key Drivers:

1. Monetary Policy: The Reserve Bank of India (RBI) kept interest rates stable throughout FY23-24, which supported the economy and the stock market.

2. Government Reforms: The government implemented various reforms to boost economic growth, including the Goods and Services Tax (GST) rate reduction and the implementation of the Insolvency and Bankruptcy Code (IBC).

3. FII Flows: Foreign institutional investors (FIIs) were net buyers of Indian equities throughout FY23-24, which helped support the market.

4. Earnings Growth: Indian companies reported strong earnings growth in FY23-24, which boosted investor confidence.

Challenges Ahead:

1. Global Economic Uncertainty: The global economic outlook remains uncertain due to factors like the ongoing Russia-Ukraine war, inflation concerns in developed economies, and the possibility of a global recession.

2. Inflationary Pressures: India is also grappling with inflationary pressures due to rising commodity prices and a strong rupee.

3. Monsoon Risks: The monsoon season is critical for Indian agriculture and the economy; any adverse weather conditions could impact growth.

Overall, while the Indian stock market has performed well in FY23-24, investors should remain cautious and focused on long-term goals as they navigate the challenges ahead.

IPO:

India saw the highest number of IPOs globally in 2023, with a 56% year-on-year growth.

Tata Group launched the Tata Technologies IPO in 2023, its first after 19 years since Tata Consultancy Services IPO in 2004.

KEY REGULATORY CHANGES IN THE INDIAN STOCK MARKET IN FY 2023-24:

• T+1 settlement: Indias stock markets shifted to a shorter T+1 (trade plus one) settlement cycle for the final list of large stocks.

• Reduced IPO listing timeline: In June 2023, SEBI reduced the listing timeline of IPOs from T+6 to T+3. This was implemented in two phases - optional from September 1,2023 and mandatory from December 1,2023.

• Revised Bank Nifty monthly expiry: The NSE announced a revision in the expiry days for Bank Nifty futures and options contracts. From September 4, 2023, the expiry was fixed on Wednesdays instead of Thursdays.

• Relaunch of Sensex and Bankex derivative contracts: The Bombay Stock Exchange (BSE) relaunched Sensex and Bankex derivative contracts in May 2023.

• Removal of tax benefits for debt mutual funds: In March 2023, the government eliminated the long-term capital gains tax benefit enjoyed by debt mutual fund investors. Debt funds investing less than 35% in equities will now be taxed at the income tax bracket level.

• Proposed tightening of rules for stock derivatives and financial influencers: Indias markets regulator SEBI is likely to enhance criteria for stocks eligible for derivatives trading and ask brokers/mutual funds to refrain from engaging unregistered financial influencers.

MARKET OUTLOOK FOR FY24-25

Indias stock markets are expected to continue their upward trajectory in FY2024-25, driven by robust macroeconomic fundamentals and favourable growth prospects.

The Indian economy is projected to grow at 6.5% in FY2025, after reaching 7.6% growth in FY2024, according to S&P Global estimates. This positions India as one of the fastest growing major economies globally.

SECTORS WHICH ARE LIKELY TO OUTPERFORM IN FY24-25

Healthcare, insurance, renewable energy, real estate, infrastructure, and manufacturing under the PLI scheme are likely to be the top performing sectors in FY2024-25, supported by favourable government policies, rising consumer demand, and strong growth prospects

• Healthcare and Insurance: Indias healthcare and insurance sectors are poised for robust growth due to an aging population, increasing chronic diseases, and rising disposable incomes. The governments Ayushman Bharat program aims to provide health insurance to over 100 million people, while the healthcare budget has been increased. Penetration of health insurance has also significantly improved in recent years.

• Renewable Energy: India aims to achieve 450 GW of renewable energy capacity by 2030, including 280 GW of solar and 140 GW of wind power. The renewable energy sector has been expanding rapidly, with the governments strong focus on clean energy.

• Real Estate: The real estate sector is expected to perform well across residential, office, and warehousing segments in FY2024-25. The warehousing market will benefit from supply chain decentralization and the governments emphasis on manufacturing. India, along with China, is projected to lead Grade-A office supply in the Asia-Pacific region.

• Infrastructure: The infrastructure sector offers attractive opportunities as the government implements long-term plans to improve regional connectivity, energy supplies, and transportation networks. Infrastructure output grew 8.6% year-on-year in the first seven months of FY2024.

• Manufacturing under PLI Scheme: The Production Linked Incentive (PLI) scheme is expected to drive growth in the manufacturing sector, with the government allocating significant funds to boost domestic production and exports.

The Indian stock markets are poised for continued positive performance in FY2024-25, underpinned by Indias robust macroeconomic fundamentals and growth prospects across diverse sectors

MUTUAL FUND INDUSTRY

The Indian mutual fund industry is expected to continue its growth momentum in FY24-25, driven by several factors such as:

1. Rising investor awareness: Increased awareness about the benefits of mutual funds has led to a surge in investment in the past few years. This trend is expected to continue, driving growth in the industry.

2. Improving economic conditions: The Indian economy is expected to recover from the pandemic-induced slowdown, leading to an increase in investor confidence and appetite for equity investments.

3. Government initiatives: The governments initiatives such as tax reforms, ease of doing business, and regulatory measures to boost infrastructure development are expected to create a favorable environment for the industry.

4. Increasing penetration in tier-2 and tier-3 cities: Mutual funds are expected to expand their reach into smaller cities and towns, leading to increased participation from a broader base of investors.

Key trends and predictions for the Indian mutual fund industry in FY24-25:

1. Asset under management (AUM) growth: The AUM of the mutual fund industry is expected to grow at a CAGR of 15-20% over the next two years, reaching around ?40-50 trillion by March 2025.

2. Equity funds will dominate: Equity funds are expected to continue to dominate the industry, accounting for around 60-70% of the total AUM.

3. Hybrid funds will gain traction: Hybrid funds, which combine equity and debt investments, are expected to gain popularity among investors seeking a balanced approach.

4. international funds will see growth: With increasing globalization and investor interest in international markets, international funds (both equity and debt) are expected to see growth.

5. Active ETFs will gain traction: Actively managed exchange-traded funds (ETFs) are expected to gain popularity among investors seeking more flexibility and transparency.

6. Robo-advisory services will grow: Robo-advisory services, which offer automated investment advice and portfolio management, are expected to grow in popularity among retail investors.

7. Technology adoption will increase: Technology adoption will continue to play a key role in the industry, with more investors using digital platforms for transactions and portfolio management.

8. Competition will intensify: The industry is likely to see increased competition among asset management companies (AMCs) as they look to expand their share of the market.

Some of the key challenges facing the industry include:

1. Market volatility: Market fluctuations can impact investor sentiment and lead to redemptions.

2. Regulatory changes: Changes in regulations can impact the industrys growth trajectory.

3. Liquidity issues: Liquidity issues can arise in certain segments, particularly in debt markets.

4. Compliance and risk management: AMCs need to ensure compliance with regulatory requirements and manage risks effectively.

Positive Events

Indias foreign exchange reserves reached a record high of USD 655.817 billion as of June 14,2024.

Net direct tax collections grew 9.81% to Rs 4.62 trillion in Q1 FY25 compared to the same period in FY24.

Advance tax collections grew 27.34% in Q1 FY25 compared to Q1 FY24.

Formal job creation under EPFO increased by 10% in April 2024 to 1.89 million, the highest addition in 72 months.

Overseas Indians parked $1 billion in NRI deposit schemes in April 2024, reflecting strong faith in Indias growth story.

Negative Events

Indias manufacturing PMI declined slightly to 60.9 in June 2024 compared to 60.5 in May.

Funds held by Indians in Swiss banks declined by 70% in 2023 to a four-year low of 1.04 billion Swiss Francs.

The RBI raised concerns about inflation pressures due to exceptionally warm summers impacting perishable goods and crop output.

In summary, while Indias economic indicators like tax collections, job creation and NRI deposits showed strong growth, the stock market was impacted by declining manufacturing activity, lower forex reserves, and inflation concerns due to the heatwave.

PESBS PERFORMANCE

Amidst the challenging landscape of the Indian Stock Market and the financial sector at large, we have not only weathered the storm but also achieved remarkable milestones. We are proud that PESBS PAT (Profit after tax) for the year ended 31^st March 2024 is Rs.1,265.60 Lakhs and EPS was Rs.11.04. These outstanding results are a testament to our unwavering commitment to excellence and the dedication of our hardworking team. With a stable margin profit, we continue to demonstrate our resilience and ability to deliver strong financial performance in future ahead.