Stocks follow rupee fall as investors fear IMF actions kicking in

Stocks on Thursday came under severe selling pressure after rupee fell to new all-time lows against dollar, panicking the market players into believing the government has buckled under the tough terms tied with International Monetary Fund (IMF) deal without much fight, dealers said.

Topline Securities in its market review said the benchmark index succumbed to rupee depreciation pressure as this event signals potential start of prior actions that the government had committed with the IMF. “Weakening of rupee even failed to entice investors for export-focused sectors, like information technology, textile, and select chemicals,” the brokerage said.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index lost 0.93 percent or 320.53 points to close at 33,971.12 points level. KSE-30 shares index followed suit with a low of 0.75 percent or 122.88 points to end at 16,159.11 points level.

Of 320 active scrips, 45 moved up, 266 retreated, and 9 remained unchanged. The ready market volumes stood at 108.579 million shares, as compared with the turnover of 110.886 million shares in the previous session. Ahsan Mehanti from Arif Habib Corporation said, panic selling was witnessed at the PSX as investors weighed rupee devaluation and uncertainty over monetary policy rate stance.

“Major fall in rupee-dollar parity in the open market, hike in gas, power tariff, and pre budget uncertainty led to a bearish close,” Mehanti added.

Madiha Javed head of research at Ismail Iqbal Securities said, “KSE-100 index remained negative throughout the session today touching intraday low of 33,574.85 points but recovered by the end as value hunters kicked in”.

Javed said the negative sentiment was driven by weakening currency.

“Banks and cements were major draggers of the index, collectively shedding 179.85 points,” Madiha added.

Selling erupted after the fresh wave of devaluation which whipped rupee by more than than 3 percent as against dollar. “It appears that the government has been fulfilling the prescription of the IMF and letting the currency to depreciate which is a bad omen not only for the companies and also for the foreign investors”, a trader said.

The market at one stage has lost more than 700 points owing to across the board selling by big investors including financial institutions and mutual funds, he said adding, some recovery arrived before the closing but was not enough to keep the market out of red zone.

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, said devaluation spurred negative sentiments in the market, clipping share price across the board. “The market received further dent on announcement of monetary policy to be announced on May 20. Divergent views a being whispered in the market. Speculations are the interest rate is likely to increase by 50 basis points to 125 basis points” Ahmad said.

The highest gainers were Nestle Pakistan, up Rs57.50 to close at Rs7249/share, and Pakistan Tobacco, up Rs32.64 to finish at Rs2492.64/share.

Companies that booked highest losses were Bata Pakistan, down Rs50 to close at Rs1290/share, and Wyeth Pakistan Limited down Rs33.85 to close at Rs669.04/share. K-Electric Limited recorded the highest volumes with a turnover of 14.604 billion shares. The scrip lost Rs0.22 to close at Rs4/share.

The lowest volumes were witnessed in Oil & Gas Development Company, recording a turnover of 2.923 million shares, whereas the scrip lost Rs1.39 to end at Rs135.34/share.