Rate cut likely to pique buying appetite

The benchmark Karachi Stock Exchange (KSE) 100-share Index, which underwent a fall of 3.4 percent during the last week, is likely to post gains because of cut in the policy rate.
The State Bank of Pakistan has reduced the policy rate by 50 basis points to 8.0 percent in the monetary policy announcement on Saturday for Mar-April.
The KSE-100 index cumulatively lost 1,128.83 points, or 3.42 percent, to close the week at 31,800.26 points. KSE-30 index fell 972.04 points, or 4.58 percent, to end at 20,227.76 points.
Average daily trading volumes dropped 0.2 percent during the week to settle at 141 million shares.
Overall, the sentiments were bearish. However, Wednesday witnessed a frantic selling and at one point, the index dipped 1,006 points, its biggest collapse since August 11 last year.
Raheel Ashraf at JS Global Capital said continuous foreign selling heightened after a foreign fund decided to pull out its funds.
“There are also fears of earlier-than-expected rate hike by the US Federal Reserve along with disturbed law and order in Karachi,” Ashraf said.
Net foreign selling during the week clocked in at $24 million, taking month-to-date foreign selling to $56 million.
However, $877 million current account surplus for February 2015 and expectation of interest rate cut in the monetary policy statement over the weekend led to value buying on Friday.
Exploration and production shares were under pressure as oil prices slipped further, while a rate cut expectation kept banking shares depressed.
Besides foreign selling, there were other reports, which affected the market behaviour: Fauji Fertilizer launching Fauji Fresh and Freeze; current account posting a surplus of $877 million for February 2015, taking Jan-Feb FY15 deficit to $1.61 billion; foreign direct investment registering a decrease of 4.0 percent in eight months and Council of Common Interests approving amendments in petroleum policy 2009 and 2012.
An analyst at Arif Habib Limited said the week that went by once again saw the market under pressure, with the KSE-100 closing 3.4 percent down.
In the last day of the week, the market made a recovery on the back of net buying by foreigners and expected rate cut.
Analysts believe the market plunged more than 9.0 percent from January highs.
However, with fundamentals remaining intact, positive macroeconomic indicators and growth in earnings per share of 70 percent of KSE-100 index companies, the decline in momentum can find its bottom near 31,500 to 31,000.
Any negative development on the political front can be termed as an opportunity to buy as in the medium-term the sentiments will be bullish.