Correction the surest bet as PSX hits four-month high

Pakistan stocks market, in the absence of any trigger, may see a correction next week, while investors can are also book profits at the current four-month high index levels, dealers said on Saturday.

An analyst said the markets is in a phase of consolidation and is due for a correction. “Though there are a few opportunities, the risk-reward ratio in most mid-caps and some large-caps are not conducive for a long trade,” he added.  “Keep taking profits off the table wherever valuations seem to be stretched.”

The Pakistan Stock Exchange's (PSX) benchmark KSE 100-share Index gained 573.07 points, or 1.74 percent, and closed the week at 33,449.62 points.

Average daily volumes rose 24 percent to 140.1 million shares. Average daily value increased 38 percent to Rs7.3 billion ($69.8 million). Market capitalization surged Rs152 billion to Rs6.95 trillion.

Farhan Mansoori at Arif Habib Limited said investors could book capital gains at the current share prices. “The index has gained last week and investors may opt to sell at strength.” The upcoming monetary policy announcement may remain a non-event for the market, as the central bank is very much likely to keep interest rate unchanged at the current levels of six percent. "Delay in announcement of the policy would also not impact the market unless something untoward is attributed to keep delaying the announcement," Mansoori said.

He, however, said results euphoria for the quarter ended March 31, 2016 may fuel some activities during the next week.

Analysts said cement and steel sectors would remain upbeat because of China Pakistan Economic Corridor projects. Big banks may also attract fresh investment. The energy sector may remain choppy owing to volatility in the international crude prices.

KASB Securities said news flow on the macro-monetary policy announcement, MSCI consultation process and upcoming result season will boost the sentiment of the market, whereby the market also expects potential earnings surprises in banks, cement, and steel and autos sectors. Fertilizer and oil & gas may not fare well in 3Q given pressure on prices.  Elixir Securities said it believes upcoming MPS along with news flows regarding inclusion in MSCI EM are likely to lend further support to the bulls.

On a sector level, engineering, tobacco and general industrials were major gainers, which rose in the range of 7.5-11.4 percent last week. Household goods were among the few losers as it fell 1.5 percent over the week. Foreigners were net sellers of $9.6 million in the week. Net selling was seen in banks and chemicals of $15.6 million and $2.8 million, respectively. Cement sector continued to attract foreign interest as net buying of $4.3 million was witnessed in the sector. National Foods, Millat Tractors, Pakistan Tobacco, Punjab Oil and TRG were the major gainers while National Bank, Soneri Bank, GlaxoSmithKline, Askari Bank, and Standard Chartered were the major losers in the index last week.