New induction at finance ministry helps stocks close positive

The outgoing week was dictated by the developments occurring on the finance horizon, where capital market witnessed volley of selling and buying, limiting the losses on improved turnover, expecting the new addition to the ministry to bring positive changes and reignite business activity, dealers said.

The domestic bourse remained under pressure during the entire week owing to lack of clarity over the prime minister’s decision to make changes in the cabinet, which finally ended with a major shuffle, including the removal of Asad Umar from the finance ministry on Wednesday.

This proved fruitful, as the market on the last session of the week recorded appreciable gains to reduce the outgoing week’s losses to some extent.

During the week, most of the sessions saw strong tussle between the buyers and sellers, where one session saw heaving declines owing to failure of the finance minister to get cabinet approval for an amnesty scheme.

Moreover, commercial banks remained under pressure on developments that a consultation process was underway for creating a Treasury Single Account (TSA) to transfer government deposits in commercial banks to the State Bank of Pakistan. That inflicted a negative round in blue-chip financials.

Despite the upheavals, the index closed thrice in the green territory, marking its support and resistance at 36,417.71 points and 37,728.11 points. The chart formation reflects that index could find support near 36,950.

A break below mentioned support could drag the index towards 36,600 points level, an analyst said. On the flip side, the index could face resistance near 37,700. A break above this level could lead the index towards 38,100.

The benchmark index closed at 37,292 points at the end of the week, receding by a mere 45 points on week-on-week basis. Volumes settled at 176 million shares (up by 18 percent compared to last week), while value traded clocked in at $39 million (up by 16 percent on week on week basis).

Negative sector-wise contributions came from tobacco (59 points), cement (55 points), and engineering (26 points).

Sectors that contributed positively to the index included fertilizers (72 points), oil and gas exploration companies (26 points), automobile assembler (25 points), and power generation and distribution (25 points).

Foreign selling continued this week, clocking-in at $1.9 million compared to a net sell of $2.2 million last week. Selling was witnessed in exploration and production ($5.3 million) and oil and gas marketing companies ($0.4 million). On the domestic front, major buying was reported by companies ($4.6 million) and individuals ($2.3 million).

An analyst from Arif Habib Limited said, “We expect the market to continue the momentum it gained on Friday and remain in the green next week.” Inclusion of technocrats into the federal cabinet might be seen as a positive step for policy making.

The analyst said that valuations across the board have opened up and investors could build positions in value stocks.

An analyst from BMA said in the upcoming week, market participants were likely to keenly track the likely course of action to be taken by the incoming finance advisor Dr Abdul Hafeez Shaikh. Further, finer details of the final International Monetary Fund package, and financial results of key blue chip companies, would also decide the market direction.