Stocks poised for more gains as quarterly results begin

Stocks are expected to continue their upward trend in the next week, as investors look forward to the start of the quarterly earnings season and hope for strong corporate results, dealers said.

Brokerage Arif Habib Ltd. expressed confidence in the market's performance. "We expect the market to retain the positive momentum in the coming week, with the result season set to begin, specific stocks are expected to garner significant attention from investors."

Additionally, the brokerage anticipated that the caretaker government will implement a gas price hike in the near future on the persistent calls from the International Monetary Fund (IMF) for gas price adjustments to address Pakistan's circular debt issue.

The market kicked off the week on a positive note, buoyed by the news of a 42 percent year-on-year contraction in the trade deficit, which stood at $5.3 billion in the first quarter of fiscal year 2024. Expectations of strong corporate results for the same period also bolstered investor confidence.

The sales of urea and diammonium phosphate (DAP) experienced significant year-on-year increases of 11 percent and 68 percent, respectively, in September 2023. Moreover, cement dispatches during the first quarter of fiscal year 2024 registered a 23 percent year-on-year growth. The recent auctions for 3-month Treasury bills and 3-year Pakistan Investment Bonds saw a decline in cut-off yields of 29 basis points and 15 basis points, respectively.

However, inflation in Pakistan rose to 31.4 percent in September 2023. Despite this, the ongoing decline in international oil prices and the consistent appreciation of the rupee against the US have alleviated some investor concerns regarding inflation.

Both factors are expected to provide a much-needed cushion against rising prices. The rupee closed at 282.69 against the US, appreciating by Rs5.05, marking a 1.8 percent week-on-week increase.

At the close of the week, the market stood at 47,494 points, having gained 1,261 points or 2.7 percent week-on-week. Trading volumes averaged 291 million shares, up 44 percent week-on-week, while the average value traded settled at $26 million, a 15 percent increase week-on-week.

Foreign selling activity was notable during the week, totaling $12.05 million compared to a net buy of $0.19 million the previous week. Major selling was observed in commercial banks ($8.86 million) and other sectors ($2.61 million). On the local front, banks and development finance institutions (DFIs) led the buying activity with $13.61 million, followed by companies with $2.1 million.

Positive contributions to the market's performance came from various sectors, with commercial banks (413 points), fertilizer (281 points), cement (176 points), power (81 points), and technology (77 points) leading the way. EFERT (108 points), ENGRO (102 points), HBL (95 points), MCB (89 points), and MEBL (79 points) were among the top individual contributors.

Conversely, the sectors that made negative contributions were exploration and production (E&Ps) (-48 points) and miscellaneous (-14 points). Among individual stocks, MARI (-23 points), PPL (-17 points), PSEL (-16 points), PAKT (-7 points), and AICL (-6 points) were the key detractors.

Analyst Nabeel Haroon at Topline Securities attributed the positive market sentiment to multiple factors, including the decline in international crude oil prices, the appreciation of the rupee due to measures against speculation and hoarding, and the ministry of Finance's instructions to implement commitments made with the IMF.

Analyst Muhammad Waqas Ghani at JS Research noted that the benchmark 100-shar index had closed positively for five consecutive days, largely driven by investor sentiment buoyed by declining international oil prices and the appreciating rupee.

The government's decision to reduce domestic petrol prices by Rs8 per litre and diesel prices by Rs11 per litre for the current fortnight was also highlighted. Additionally, international oil prices (Brent) experienced a 12 percent week-on-week decrease, falling to $84.86 per barrel.

Furthermore, the SBP's foreign exchange reserves decreased by $21 million, reaching a total of $7.6 billion.