Positive triggers likely to change market trajectory

Stocks were on a rollercoaster during the week ended March 5, 2021 as political excitement ahead of senate election and unexpected defeat of finance minister kept market participants on their toes, a sentiment likely to change next week with fresh and positive triggers.

“The intensifying political mayhem enforced panic selling in the market where average daily trading volume plunged notably by 34 percent during the outgoing week to 386 million shares compared to 589 million shares recorded in the previous week,” an analyst at Shajar Capital said.

However, rising global crude oil prices and PM’s decision to seek vote of confidence from the national assembly helped the benchmark to close almost flat.

The KSE-100 shares index shed 0.06 percent or 27.67 points to close the week at 45,837.35 points level. KSE-30 shares index closed flat at 19,173.83 points.

Further, high inflation numbers affected the KSE-100 index to plummet by 926 points at the start of the outgoing week. “The enraging sell-off in the benchmark index has kept the KSE-100 index within the range of 1,100 points during the week, where we witnessed intra-day decline of 1,073 points after the unofficial results of senate elections, on Thursday,” an analysts said.

An analyst at Arif Habib Limited said the domestic bourse started the week on a positive note amid expectations of a successful senate election for the ruling government. “However, the results were a major surprise with the ruling government facing a setback on the hotly contested Islamabad seat, which sent the market tumbling. PM Imran Khan’s decision to seek a vote of confidence and expectations of success helped rebound sentiment starkly on Friday.”

Foreign selling continued this week clocking-in at $10.7 million compared to a net buy of $0.3 million last week. Selling was witnessed in commercial banks ($10.1 million) and technology and communication ($2.2 million). On the domestic front, major buying was reported by insurance companies ($8.4 million) and banks ($8.0 million).

Ahmed Lakhani at JS Global Capital said after remaining on edge in the initial trading sessions of the week, the market plunged by more than 800 points on Thursday before making a sharp recovery on the next day, ending marginally down.

“Thursday's reaction was on the cards, given the hotly contested senate elections. To summarise, the ruling party gained in terms of representation in the senate (however, still in a minority compared to the opposition coalition), but lost a key seat from Islamabad on which the finance minister was contesting,” Lakhani added.

On the other hand, rise in profitability of textile industry along with increased exports in last eight months improved sentiments in the sector. On top of that, the 5.0 percent surge in global crude oil prices during the week along with increasing sales volume

enhanced sentiments in the refinery sector.

Dealers said the reawakening of Covid-19 cases in the country along with the discontinuation of Pakistan Super League (PSL), has subdued index return by 6.0 bps in the outgoing week compared to the previous week’s closing.

Analysts believe the index would likely find triggers from the results of new senate chairman, which might likely recover sentiments in the short-term.

Further, the announcement of automobile industry volumes might improve sentiments in the sector. “We also believe the macroeconomic numbers will likely revive index performance in the week ahead,” Shajar Capital analyst said.