Stocks likely to stay positive on IMF, inflation front

KARACHI: Stocks closed slightly higher during the outgoing week. The market is expected to stay around the IMF bailout programme and inflation numbers next week.

“The upcoming IMF mission and the first review of the bailout program are expected to reinforce investor confidence,” stated brokerage Arif Habib Ltd. “Inflation for Feb 2025 is expected to clock in at 2.2 per cent, marking its lowest level since October 2015. This decline in inflation is likely to further strengthen investor optimism.”

Moreover, with the ongoing result season, certain scrips are anticipated to be in the limelight amid expectation of robust results.

The market closed in the green zone this week, supported by improved liquidity on the local front and positive investor sentiment surrounding discussions on the additional $1 billion climate funding under the IMF’s $7 billion Extended Fund Facility (EFF).

A key development during the week was the signing of a Memorandum of Understanding (MoU) between Pakistan and Iran, aimed at increasing bilateral trade volume to $10 billion. However, investors remained cautious, closely monitoring potential corporate and provincial tax reforms ahead of the IMF’s review for federal budget FY26 approvals. The KSE-100 index closed at 113,252 points, reflecting a week-on-week gain of 450.7 points, or an increase of 0.40 percent. Average volumes arrived at 492 million shares (down by 17 per cent WoW), while the average value traded settled at $86 million (down by 0.6 per cent WoW).

Foreigner selling continued this week, clocking in at $6.0 million compared to a net sell of $5.1 million last week. Major selling was witnessed in banks ($3.9 million) followed by all other sectors ($1.3 million). On the local front, buying was reported by mutual funds ($31.6 million) and brokers ($0.8 million).

Sector-wise positive contributions came from commercial banks (510 points), glass & ceramics (83 points), power generation (78 points), E&Ps (68 points), and food (47 points). Scrip-wise positive contributors were OGDC (206 points), MCB (203 points), BAHL (176 points), MEBL (106 points), and MLCF (95 points).

The sectors that contributed negatively were technology & communication (109 points), inv. banks (31 points), engineering (23 points), and insurance (21 points). Scrip-wise negative contributions came from HBL (109 points), MARI (105 points), SEARL (72 points), MEHT (66 points), and POL (57 points).

Analyst Muhammad Waqas Ghani at JS Research said the KSE-100 remained positive this week closing at the level of 113,252 points, gaining 0.4 per cent WoW.

The week began with news that an IMF staff team will visit Pakistan in early March for discussions on the first review of Pakistan’s Extended Fund Facility. Initial talks will focus on technical aspects, followed by policy discussions. As per news flow, the budget for the upcoming fiscal year may also be reviewed. Meanwhile, on Monday, a separate technical mission of the IMF began talks regarding Pakistan’s request for around $1.5 billion in additional financing to combat climate change. “Following a 2.4 per cent inflation reading in Jan-2025, we believe that the CPI is expected to drop to 2.3 per cent in Feb-2025, marking a nine plus year low and continuing Pakistan’s current sharp disinflation trend,” he said. “Given rapid disinflation, our base case CPI estimate for FY25 averages at 5.7 per cent. In our view, an uptick in food inflation would be seen during Ramazan.” The State Bank of Pakistan’s (SBP) foreign exchange reserves augmented by $21 million WoW, settling at $ 11.2 billion, while the rupee depreciated slightly by 0.04 per cent, closing at 279.57 against the US dollar.

Contrary to the slight increase in the week, the market closed slightly lower during February. Analyst Nabeel Haroon at Topline Securities said the KSE 100 index declined by -0.88 per cent month-on-month.