Stocks seen acting erratic amid jittery Indo-Pak relations

Geo-political tensions between Pakistan and India are expected to prevail upon the equity market sentiments with investors likely to opt for cherry-picking in results-driven rally after stocks saw panic selling in the outgoing week, dealers said.

JS Group expected the market to act erratic amid jittery Indo-Pak relations and unforeseen developments.

“Henceforth, we advise investors to stay vigilant with superfluous liquidity and cherry pick fundamentally strong stocks at lower levels,” the brokerage said.

Investors resorted to panic selling in the outgoing week after India’s alleged assault near the disputed line of control.

The KSE 100-share Index of Pakistan Stock Exchange recovered from a low of 37,330 points, but it eventually closed the week at 39,539 levels, down 477 points or 1.2 percent.

Average daily volumes for the week increased 52 percent to 160 million shares. Average daily value traded also jumped 33 percent to $51 million.

“It was a tumultuous week for Pakistan equities as Pakistan and India exchanged tit for tat air strikes with one another for the first time since in several years,” Topline Securities said. “Investors remained cautious throughout the week in fear of the situation further escalating. Tensions still remain high between the two countries.”

BMA Capital Management said as far as sector-specific performance was concerned, tobacco emerged as outperformer, up nine percent, whereas multi-utilities, cement, and automobile sectors remained the major laggards, ending the week down seven, four, and four percent, respectively.

Other factors that affected the market during the week included up to 10 percent hike in petroleum prices, government’s permission to signing of power purchase agreement with Sui Northern Gas Pipelines Limited for re-gasified liquefied natural gas supply, Singaporean government’s offer for building houses, and the central bank’s go-ahead to Islamic banks to offer refinance.

Foreign selling was witnessed during the week clocking in at $1.3 million compared to a net buying of $3.5 million last week. Selling was witnessed in banks ($1.9 million) and exploration and production ($0.4 million). On the domestic front, major buying was reported by insurance companies ($15.6 million).

Topline Securities said reserves held by the State Bank of Pakistan decreased by a marginal $6 million to $8.04 billion during the week ended on Feb 22. Holdings of the commercial banks were recorded at $6.78 billion while total liquid reserves of the country stood at $14.82 billion.

Analysts said stocks are expected to show recovery after otherwise a muted week on macroeconomic landscape.

The market is likely to maintain its positive momentum in the coming week as tensions subside between Pakistan and India. Major results announcements scheduled in the upcoming week include Fatima Fertilizer, AGP, a part of OBS Group, and Shell.