Stocks expected to shed losses in results-driven rally

KARACHI: Stocks are expected to recover from the year-to-date lows in the upcoming sessions as investors anticipate results-driven rally, while vagueness related to IMF’s deal is dissipating, dealers said.

“We view the market to remain positive in the upcoming weeks as a staff level meeting of IMF (International Monetary Fund) scheduled in April will revive the market sentiment,” brokerage Arif Habib Limited said in a report.

The KSE 100-share Index of Pakistan Stock Exchange ended the week down 2.9 percent or 1,128 points to close at 37,522 points. The market activity slowed down sharply during the week as evident by seven and 20 percent week on week drop in average daily turnover and average daily turnover value to 119 million shares and $25 million, respectively.

Contribution to the downside was led by commercial banks down (383 points) due to foreign selling, fertiliser (134 points) amid announcement of 100,000 tons of urea import and oil and gas marketing companies (35 points) on account of slowdown in petroleum off-take by 17 percent in March.

BMA Capital Management said the upcoming week marks the commencement of the results season.

“Emergence of clarity and details on the amnesty scheme and rapid progress on the IMF bailout package can help the market recover from the lows.”

Stocks posted 16-week highest losses during the outgoing week owing to slow growth in economy, higher inflation rate and continuous rise in benchmark interest rate. Four sessions closed in red and one in green.

“Investors’ sentiments remained under pressure throughout the week owing to slow growth of economy (as indicated by cement and petrol sales numbers) and weak macro indicators (as indicated by five years high inflation and fiscal deficit),” Topline Research said.

“Further hike in policy rate also encouraged investors to make their way from equities towards fixed income securities like National Saving Certificates and other government securities, which are offering double digit risk free returns.”

Major losers were HBL (122 points), UBL (71 points), PPL (58 points), Engro (51 points), and PSO (47 points).

Foreign selling, during the week, clocked in at $3.7 million compared to a net buying of $0.5 million last week.

Volatility remained high during the outgoing week, supported by combination of news flow on domestic politics and economic front.

Drag on market sentiments was evident as the State Bank of Pakistan in its bi-monthly monetary policy committee meeting raised the policy rate by 50 basis points to 10.75 percent on rising inflationary fears and continued stress on the external front as well as fiscal pressures.

Finance Minister Asad Umar’s statement on talks with the IMF nearing final stages and emergence of news flow on another amnesty scheme failed to rejuvenate the market.

Analysts said rupee fall is also impacting the market sentiments. “We expect the rupee to settle at 147/USD by June,” the analyst said.

“Moreover, result of offshore drilling at Indus offshore block G ‘Kekra-1’ is also expected within six weeks and materialisation of oil / gas discovery will drive the market.”