Stocks likely to shed some losses on attractive valuation; oil in focus

Stocks may come back to positive trajectory next week if investors approach oil sector and take positions in shares lost substantial values on battering that caused market to witness the biggest weekly fall of over one and half years, dealers said.

Analysts of Ismail Iqbal Securities expected the market to turn positive as the recent meltdown made valuations attractive.

“E&P (exploration and production) sector is likely to recover post OPEC+’s (the Organisation of Petroleum Exporting Countries) decision to cut oil production by 1.2 million barrels/day, which is higher than the initial expected cut of one million barrels per day,” a brokerage analyst added.

The benchmark KSE 100-share Index declined 4.8 percent or 1,934 points to close at 38,562 points on concerns over rupee volatility, falling foreign exchange reserves, and cabinet shuffling. It was the biggest weekly fall in 67 weeks.

Market activity remained dull during the week with average traded value falling 18 percent to $53 million in spite of seven percent higher average daily traded volumes, reflecting concentration of activity in penny stocks.

“The outgoing week was an unsatisfactory one for the benchmark index as developments like interest rate hike and rupee devaluation along with lack of any triggers during the outgoing week kept the benchmark index under selling pressure,” Topline Securities said.

International oil prices remained volatile and therefore E&P remained under pressure during the week, chipping away 279 points from the index.

The sector was only second to commercial banks, which fell victim to the negative sentiments of the market despite 150 basis points interest rate hike. The sector ate away 343 points from the index.

Cement stocks were also down 5.6 percent due to 14 percent decline in dispatches in November with local off-take particularly remained dismal.

After remaining depressed for most part of the week, cement stocks nonetheless recovered on Friday owing to news regarding beginning of construction work on Diamer-Bhasha and Mohmand dams from next year.

Foreign selling for the week stood at $2.5 million versus $51 million in the previous week. This was there 31st week of consecutive selling.

Among local investors’, mutual funds were net sellers of $31 million while insurance sector was net buyers of $18.9 million.

The central bank’s foreign exchange reserves further slipped $560 million to $7.5 billion owing to persistently high current account deficit and external debt servicing in the absence of meaningful financial flows.

“The upcoming week is expected to remain lacklustre amid absence of triggers and economic data points,” BMA Capital Management said.

Trade deficit and auto sales numbers are expected to release early next week and any positive surprise could garner investor attention.

Brokerage Arif Habib said attractive valuations could revive investor’s interest, but the market is expected to be range-bound.

Prime Minister Imran Khan’s visit to Karachi scheduled on Sunday (today) to address economic concerns and take businessmen into confidence might affect the market moves, according to the analysts.