Stocks to mostly toe monetary trend

Stocks, which had an erratic outgoing week, punctuated with sharp swings and sleepy crawls, are unlikely to buck the prevalent downtrend ahead of monetary policy announcement, traders said.

Pakistan Stock Exchange’s KSE-100 Shares Index (PSX) lost 1.63 percent or 745 points to close the week at 45,018 points week-on-week.

Arif Habib Ltd in its weekly market review said investors should be cautious as the MPC (Monetary Policy Committee) would meet on January 24, whereas inflationary pressures were also set to rise in the backdrop of rising commodity prices.

“Moreover, talks with the IMF are expected to resume on the January 28, which could have a positive impact on the market,” the brokerage said.

Spectrum Research expects the State Bank of Pakistan (SBP) to keep the policy rate unchanged at 9.75 percent.

“We believe, the SBP is evaluating the impact of tightening monetary policy on economic growth and inflation.”

Moreover, Spectrum analysts said, in the last MPC meeting, it was stated that the end goal of mildly positive real interest rates on a forward-looking basis was now close to being achieved.

“Therefore, the policy rate is likely

to stay unchanged in the upcoming monetary policy meeting,” the brokerage report said.

The market started on a negative note this week and could not come out of the red zone throughout the week because of a resurgence in Covid-19 cases and higher global commodity prices.

However, the sentiment turned positive on Friday after the upward revision of GDP numbers from 3.94 percent to 5.4 percent.

Furthermore, FDI increased 20 percent during the first half of the fiscal year to $1.05 billion against $880 million during the same period last year, which was taken positively by the investors.

Average volumes clocked in at 201 million shares, down 43 percent week-on-week, while average traded value settled at $42 million, down 17 percent week-on-week.

Foreigners remained net sellers this week, at $2.09 million compared to a net buy of $0.53 million last week.

Major selling was witnessed in oil marketing companies ($1.4 million) and technology & communication ($1.0 million). On the local front, buying was reported by individuals ($12.4 million), followed by banks ($5.9 million).

Sector-wise negative contributions came from technology & communication (241 points), commercial banks (96 points), cement (69 points), refinery (65 points), and fertiliser (63 points).

Scrip-wise negative contributors were TRG (239 points), CNERGY (31 points), MCB (23 points), DAWH (22 points), and PSO (21 points).

Sectors that contributed positively were oil & gas exploration companies (36 points), power generation & distribution (7 points), and real estate investment trust (6 points). Meanwhile, scrip-wise positive contributions came from KAPCO (30 points), MARI (24 points), and BAHL (23 points).

Wasil Zaman, an analyst at JS Research, said the market remained under pressure throughout the week witnessing the biggest decline on Thursday.

“Investor participation during the week took a hit as it decreased by 43 percent to 201 million shares in terms of volume while a decrease of 17 percent was witnessed in the average daily traded value,” he said.