Stocks likely to stay positive amid key policy rate decision

KARACHI: Stocks closed higher during the outgoing week. The market is expected to keep up with the positive momentum, with the expectation of a higher cut in the key policy rate next week.

“We anticipate the market to have a positive momentum in the coming week,” said brokerage Arif Habib Ltd. “The major highlight of the upcoming week is the monetary policy meeting, which will be closely monitored by investors. We project a 200bps rate cut, which will take the policy rate to 15.5 per cent.”

The market commenced on a positive note this week on the back of the expectation of a rate cut in the upcoming monetary policy next week along with robust financial results, due to which the market reached an all-time high of 91,358 points in the intraday on October 29.

The market closed at 90,860 points, up 866 points or 0.96 per cent week-on-week (WoW). Average volumes arrived at 559 million shares (down 16.5 per cent WoW), while the average value traded settled at $95 million (down 9.3 per cent WoW).

Foreigner buying was witnessed during this week, clocking in at $1.97 million compared to a net sell of $16.36 million last week. Major buying was witnessed in all other sectors ($4.7 million) followed by cement ($2.4 million). On the local front, selling was reported by banks/DFIs ($ 13.1 million) followed by other organizations ($1.1 million).

Sector-wise positive contributions came from E&Ps (391 points), technology (319 points), cement (244 points), OMCs (189 points) and pharmaceuticals (174 points). Scrip-wise positive contributors were SYS (345 points), PPL (345 points), UBL (223 points), PSO (173 points), and CHCC (154 points).

The sectors that mainly contributed negatively were fertiliser (331 points), leather & tanneries (73 points), and engineering (45 points). Scrip-wise negative contributions came from EFERT (209 points), MARI (144 points), NBP (119 points), Engro (109 points), and MEBL (105 points).

Analyst Abdul Basit at JS Research said after recent few weeks of foreign selling, this week saw a turnaround with a net foreign buying of $2 million. During the week, CPI for October 2024 clocked in at 7.2 per cent, with a 2.0 per cent uptick on MoM basis. Pakistan reported a primary surplus of Rs1.7 trillion during Q1FY25, first seen in the last two decades majorly driven by higher profitability reported by the SBP.

In other news, Pakistan signed additional MoUs with Saudi firms including other positive developments during PM Shahbaz’s visit to the Kingdom of Saudi Arabia, where he met the Saudi crown prince. Moreover, Pakistan is also likely to receive an inflow of $2.75 billion by the Asian Development Bank over the next four years, with $800 million likely to be disbursed during FY25.

The recent T-bill auction witnessed further decline in yields by 64-120bps amid anticipation of a likely rate cut in MPC scheduled on November 4th, 2024.

State Bank of Pakistan reserves during the week increased by $115 million, to clock in at $11 billion.

According to Topline Securities’ market review, the KSE 100 Index increased by 10 per cent on a WoW basis, where a continuous reallocation of funds towards equities, given a downward spiral in yields on fixed income instruments, continues to provide stimulus to the market.