KARACHI: Stocks concluded a volatile week on a mixed note as the State Bank of Pakistan’s (SBP) decision to maintain the discount rate steady at 22 percent dampened investor sentiment, but analysts anticipate a potential rebound in the coming week, buoyed by positive developments in new loan negotiations with the International Monetary Fund (IMF).
“With anticipation building around positive advancements in the new IMF programme, the market is poised to maintain a positive trajectory in the upcoming week,” brokerage Arif Habib Ltd said in a market note. “This anticipation is set to buoy market sentiment and bolster investor confidence.”
Moreover, the attraction of stocks trading at attractive levels is expected to serve as an additional catalyst, potentially enticing further investor participation.
The index experienced persistent pressure throughout the week as the market anticipated a rate cut, which remained unchanged at 22 percent.
The market closed at 71,902 points, declining by 841 points or 1.16 percent week-on-week. Average volumes arrived at 516 million shares (down by 21 percent week-on-week), while the average value traded settled at $86 million.
Foreigner buying continued this week, clocking in at $8.0 million compared to a net buy of $3.0 million last week. Major buying was witnessed in fertilizer ($3.3 million) and commercial banks ($2.3 million). On the local front, selling was reported by other organisations ($5.6 million) followed by individuals ($1.8 million).
Sector-wise negative contributions came from technology & communication (276 points), fertilizer (256 points), commercial banks (201 points), pharmaceuticals (50 points) and chemicals (43 points). Scrip-wise negative contributors were EFERT (228 points), SYS (120 points), TRG (118 points), UBL (96 points), and NBP (61 points).
The sectors which mainly contributed positively were oil & gas exploration companies (211 points), and oil & gas marketing companies (22 points). Meanwhile, scrip-wise positive contributions came from PPL (217 points), BAHL (73 points), BAFL (46 points), SNGP (37 points), and OGDC (25 points).
Shagufta Irshad, an analyst at JS Research, said the benchmark index took a breather with 1.2 percent week-on-week correction, after marking a new high last week.
The correction was overdue as the central bank decided to keep the policy rate unchanged at 22 percent for the sixth time in its monetary policy meeting held this week. Inflation for April 2024 came in at 17.3 percent which is a 23-month low.
Nabeel Haroon, an analyst at Topline Securities, said some profit-taking was observed during the week. "This decline can be attributed partially to SBP maintaining the policy rate at 22 percent citing high level of inflation and the continuation of the current monetary policy stance to bring inflation down to the target range of 5 to 7 percent by September 2025," Haroon said.
"Apart from it, result announcements for the March quarter end by companies also triggered selling in the market as there was a decline observed in overall profitability on quarter-on-quarter basis."
Other major developments during the outgoing week were: IMF approving the disbursement of its last loan tranche worth $1.1 billion which completed the second review under the SBA for Pakistan, allowing for bringing total disbursements under the arrangement to about $3 billion.
T-Bill auction in which participation of Rs890 billion was seen with the government raising Rs253 billion against a target of Rs300 billion and maturity of Rs166 billion, where yields on 3, 6, and 12-month bonds remain unchanged.
In addition, foreign reserves held by SBP increased by $25 million week-on-week, clocking in at $8.0 billion. During the week rupee closed at 278.21 against dollar, strengthening by Rs0.18/0.06 percent week-on-week.
In other news, FBR faced a shortfall in revenue collection during April 2024, taking 10FY24 shortfall to Rs48 billion compared to its target. The government also slashed petrol by Rs5.4/litre and diesel rates by Rs8.4/litre.