Stocks will track the monetary action to find a bearing next week, but may remain on the edge as central bank’s hawks are likely to deal with the inflation more aggressively, traders said.
“With the Monetary Policy Committee scheduled to convene on July 7, 2022, we believe market participants will factor in another hike in the benchmark policy rate, especially after the CPI announcement of CPI numbers,” said a weekly market report by Arif Habib Ltd, a brokerage.
Therefore, the brokerage said, short-term jitters could not be ruled out and the sooner the IMF deal was struck, the better it would be for the equities.
“We advise clients to cherry-pick fundamentally strong blue-chip stocks,” the Arif Habib analysts said.
The market opened the week on a positive note cheering the credit of a commercial loan worth $2.3 billion from China, which boosted State Bank of Pakistan (SBP) held reserves to $10 billion. Resultantly, rupee strengthened against the greenback to 204.85/dollar on June 30, 2022.
Pakistan also received a Memorandum of Economic and Financial Policies from IMF, which signalled that the government
was inching closer to an agreement with the IMF.
In addition, the National Assembly approved the amendments made in the Finance Bill 2022, which brought clarity to the market, especially banking sector.
During the week, the IPPs (independent power producers) under the 2002 power policy received the second installment of outstanding dues worth Rs96 billion.
However, the sentiment was adversely affected by the fiscal measures undertaken by the government to make ground for the approval of seventh and eighth reviews.
Moreover, the government further increased prices of petrol and diesel by Rs14.85 and Rs13.23/litre, respectively because of the imposition of a petroleum levy to help meet the revenue target set for FY23 under the IMF programme.
Topline Securities said Pakistan would have to fulfil a few more prior actions to secure two combined tranches of about $1.85 billion from the IMF.
The consumer price inflation clocked in at 21.32 percent for June 2022, while the current account deficit widened to $1.4 billion in May 2022 which dampened the overall sentiment.
The market closed at 41,630 points, gaining 579 points (up by 1.41 percent) week-on-week. Average volumes clocked in at 199 million shares, down by 34 percent week-on-week, while average value settled at $30 million, down 31 percent.
Foreign selling was recorded at $1.52 million compared to a net selling of $2.39 million last week.
Major selling was witnessed in fertiliser ($0.3 million) and all other sectors ($0.2 million).
On the local front, buying was reported by banks ($6.8 million) followed by individuals ($4.1 million).
Sector-wise positive contributions came from cement (92 points), power (74 points), E&P (69 points), fertiliser (68 points), and banks (55 points).
Stocks that underpinned the market were HUBC (83 points), POL (64 points), LUCK (47 points), EFERT (39 points), and MARI (36 points).
Sectors weighed the index down included refineries (6 points) and cable & electrical goods (4 points). Meanwhile, major losers included HBL (32 points), EPCL (22 points), OGDC (22 points), KAPCO (13 points), and DAWH (11 points).
Brokerage JS Research said the week started on an optimistic note as investors brushed off the pessimism after the announcement of super tax last week.