Struggling stocks to take cue from monetary stance

Stocks were mostly down-to-dull the whole week as virus misgivings remained a continuous drag on sentiments, while this trend was likely to endure down the line, a highly hoped-for dovish monetary stance by central bank may reset the course of the market for the better, dealers said.

Pakistan Stock Exchange's KSE-100 shares index plummeted 0.94 percent or 382 points during the outgoing week to conclude at 40,187 points week-on-week (WoW).

Muhammad Saeed Khalid, head of reseach at Shahar Capital, said, “We expect the stock market will likely be supported by the unexpected move of the State Bank of Pakistan to cut the benchmark policy rate because of the reemerging COVID-19 pandemic in the country”.

“We also believe the NCPI (National Consumer Price Index) inflation numbers for the month of November may increase of chances of buying at dips,” he said.

He further said the expected announcement of fertiliser numbers for the 4MFY21, was also likely to improve sentiments in the sector.

Muhammad Jawad Vohra from BMA Capital Management Equity Desk said, “Considering the improving macroeconomic indicators, we expect the market to remain upbeat in the coming week, but caution is advised amid concerns over potential smart lockdown owing to the second COVID-19 wave”.

“The higher inflation continues to remain a cause of concern as central bank is set to announce its monetary policy next week,” Vohra added.

During the week, investor participation declined 41 percent. Average daily volumes clocked in at $171 million shares, while the average traded value fell 34 percent WoW to $43 million.

Brokerage Arif Habib Limited in its weekly market report said, “We highlight the deteriorating COVID situation as a major risk for local investment climate”.

“Albeit, the government has so far avoided a complete nationwide lockdown which, if imposed, can prove seriously adverse to the bourse,” report said.

"That said improving economic fundamentals and strong corporate profitability trends may revive sentiment once risks associated with coronavirus subside,” the brokerage added.

Foreign investors sold equities worth $6.6 million compared to a net sell of $7.4 million last week.

Major selling was witnessed in commercial banks ($4.0 million) and cement sector ($2.1 million). On the local front, major buying was reported by individuals ($6.5 million) and companies ($4.3 million).

Equities remained sluggish throughout the week owing to spike in COVID-19 cases, where 7-day moving average of infection ratio crossed 6.5 percent mark and active cases crossed 33,500 mark for the first time in the last 117 days.

Some positivity prevailed after drugmaker Pfizer announced its COVID-19 vaccine was 95 percent effective compared to previous claims of 90 percent. Likewise, another US healthcare firm ‘Moderna’ revealed its vaccine also had a success rate of 95 percent. However, the vaccine rally proved short lived. The WTI and brent oil index inched up 5 percent and 4.2 percent respectively, following the announcements.

Sector-wise negative contributions came from fertilisers (94 points), oil & gas exploration companies (81 points), and cement (67 points).

Scrip-wise negative contributions were led by DAWH (68 points), OGDC (45 points), and SYS (44 points).

On the flipside, major sectoral gains were observed in banks (28 points), while scrip-wise positive contributions were led by UBL (55 points) and MEBL (15 points).