Bull-run ahead after deeper rate cut

Karachi shares are set for another bull run in the week ahead after a surprised deeper cut in the discount rate by the central bank, which would likely to direct fund towards equity market, analysts said.
Energy, textile, fertiliser and cement sectors set the direction of the stock market during the last week and barring the last two sessions the benchmark index kept moving upward in the remaining ones to end at 34,026 points, the analysts said. The State Bank of Pakistan cut the policy rate by 100 basis points to 8.5 percent in its new monetary policy announcement.
“This will help in continuation of the bull run at the stock market in spite of foreign selling during the last seven weeks,” said Mohammad Sohail, chief executive officer at Topline. An analyst said given the consistent market performance last week, we recommend exposure especially to the large-cap shares having strong growth, attractive yields and low volatility.
The benchmark Karachi Stock Exchange (KSE) 100-Index increased by 240 points, or 0.7 percent week on week, to 34,026 points as against 33,786 points. However, average daily volume tumbled nine percent to 303 million shares from 331.5 million shares during the preceding week. Foreign portfolio investment sharply fell 91 percent to $1.7 million from $17.6 million. The government’s decision to inject Rs40 billion in the ailing energy sector to fend off petrol crisis, which escalated last week, may not make a much difference, said the analyst. “These small cash injections may do little to alleviate precarious liquidity conditions of Pakistan State Oil (PSO),” he added.
However, oil market companies generally cheered the proposed fund injection by the government with PSO rallying 5.9 percent and Hascol jumping 13.6 percent.
K-Electric’s (KEL) stellar run at the bourse came to a halt as the time period for receiving consent from its majority shareholders to waive off their right on the proposed dividend lapsed on Thursday. KEL was down 11.09 percent.
Analyst Raheel Ashraf at JS Research said the market remained volatile ahead of the monetary policy statement. “Profit taking was witnessed at the fresh highs, resulting in the benchmark KSE-100 closing up only 0.7 percent,” he added.
During the last week, Bestway Cement expressed its intention to acquire 50 percent of the remaining free-float of Lafarge Cement via public offer against the market’s anticipation of 75 percent. Cotton arrivals rose 10.6 percent to 14.3 million bales year-on-year in the current fiscal year-to-date. The tally of broadband subscribers hit 3.79 million by December-end last year. And, cut-off yields in treasury bills dropped 18 to 28 basis points.
Within energy sector, the bellwether Oil and Gas Development Company (OGDC) kept itself relatively insulated from the heat of falling international oil prices. In the previous week, the company contributed 111 points into the index.
Fertiliser scrip did much better with Fauji Fertilizer Company and Engro Corp cumulatively adding 179 points to the 100-share Index on the reports that the sector was being exempted from the expected gas tariff hike.
Together, consumer goods firms Nestle, National Foods and Colgate contributed 106 points.
Indus Motors, Mari Gas, Pace (Pak) Ltd, Engro Corporation and Shezan International were the major gainers, while Pak Cables, Colgate Palmolive, KEL, NIB Bank and Nishat Chunian Limited were the major losers in the Karachi shares benchmark index during the last week.