Stocks seen sensitive to inflation, results

Stocks are seen flattish-to-mixed with rollover adjustments mostly keeping gains in check amid fears of an inflationary spike, but strong corporate earnings may give the index a leg to stand on, dealers said.

Pakistan Stock Exchange's (PSX) KSE-100 shares dipped 0.12 percent or 62.96 points to close at 45,868 points over the last week, mostly owing to a profit-selling spree in the overbought zone.

As of January 21, 2021, the outstanding futures value was recorded at Rs23.5 billion as compared to Rs23.7 billion last week (January 15, 2021). Muhammad Saeed Khalid, head of research at Shajar Capital, said, “We believe the index to remain on the downward trajectory mainly due to start of the rollover week where inflation numbers are expected to be released”.

Going forward, fertiliser sector was expected to perform mainly on the higher off-take numbers along with hopes of recovery in profitability of the sector for the year CY20, he said. “We also believe the higher cement sales for 7MFY21, will likely improve investor sentiments in the sector,” Khalid added.

Muhammad Jawad Vohra, from BMA Trading Desk said, “We expect the market to remain upbeat given the improving macroeconomic indicators, upcoming result season, and sooner-than-expected vaccine rollouts”.

However, the index might witness some corrections next week as the rollover week approaches, he added. “We continue to prefer banks, E&Ps, fertilisers, automobiles, and cements,” Vohra added.

Tahir Abbas, director research at Arif Habib Ltd said, key highlights for next week were the auctions for PIBs (Floating Rate) and T-Bills in which the government was planning to raise Rs460 billion cumulatively.

“We expect the market to trade in the green due to central bank’s policy rate status quo in the near term, encouraging projections like current account deficit expected to remain below 1 percent of GDP for FY21, slowdown in Covid-19 infection ratio, and stable PKR/USD parity,” Abbas said.

The power sector stayed in limelight during the week as progress was made on negotiations between the government and Independent Power Producers (IPPs) to resolve circular debt issues. Six more IPPs (19 in total) have moved ahead on the draft agreement for binding contracts with the government, paving way for reduction in tariff and circular debt in coming years.

During the week, average volumes clocked in at $510 million shares (down 25 percent week-on-week), whereas average value traded settled at $118 million (down by 9 percent week-on-week).

Foreign investors sold equities worth $5.51 million compared to a net sell of $2.10 million last week. Major buying was witnessed in technology and communication ($3.24 million) and power generation and distribution ($2.43 million).

On the local front, major selling was reported by mutual funds ($19.9 million) followed by

broker proprietary trading ($7.46 million).

Contribution to the downside was led by oil and gas exploration companies (143 points), fertilizer (43 points), oil and gas marketing (33 points), automobile assembler (25 points), and pharmaceuticals (16 points).

Scrip-wise major losers were PPL (65 points), OGDC (59 points), POL (59 points), ENGRO (31 points), and MCB (22 points).

Whereas, scrip-wise major gainers were TRG (110 points), MARI (41 points), BAHL (34 points), KTML (29 points), and ICI (26 points).