Stocks to take cue from policy rate outlook

Analysts foresee the stock market will revolve around monetary policy prospects during the next week.
One analyst at KASB Securities said the market apparently factored in a likely cut of more than 50 basis points in the future monetary policy. A cut below than the expectation may hurt the sentiments.
“The monetary policy announcement will govern the market direction, while any negative developments on the political front may disrupt the rally,” he said. The benchmark Karachi Stock Exchange 100-Index surged by 1.4 percent, or 462 points, to an all-time high of 33,786 points during the last week. Average daily volume rose by 12.2 percent to 331.5 million shares. Foreign portfolio investment stood at $17.6 million as compared to outflow of $6.1 million in the preceding week.
The week’s action was dominated by growing expectations of a heavy cut in the discount rate in the monetary policy statement. With the State Bank announcing that it would unveil the statement on 24th of this month, high dividend yield scrip, like FFC and HUBCO, witnessed a renewed interest of investors. FFC stocks rallied 2.2 percent HUBCO 4.6 percent week on week. Earlier in the week, the government approved 15 percent regulatory duty on the import of steel products, which augured well for local steel manufacturers. Raheel Ashraf, an analyst at JS Research said the market sustained its bullish momentum during the last week ahead of the monetary policy announcement. “The market expects the SBP to cut the policy rate by 50 to 100bps,” he said. “We expect it will be 50bps.” Auto sector was in the limelight after the release of better-than-expected sales number for December, which grew by 28 percent year on year.
Other key highlights of the week included growth in banking deposits by 10.8 percent year on year to Rs8.4 trillion in 2014, government hinting at renewal of the agreement with KEL for supply of 650MW and National Savings attracting Rs201 billion in July-Jan FY15 against the target of Rs153 billion. A report of Elixir Securities said the index continued with its upward trend as international oil prices maintained downward movement, touching new lows.
The reports of a possible secondary public offering by Engro Fertilizer attracted the investors, reflecting in 4.7 percent rise in Engro. Pak Cables, Shifa Int Hospitals Ltd, Arif Habib Corporation, Hum Network Limited and Dawood Hercules were the major gainers, while PTCL, Pakistan Petroleum, Pakistan Oilfields, Oil and Gas Development Co and Soneri Bank were the major losers on the KSE 100-share index during the last week.