Stocks to track rupee amid IMF uncertainty

A depreciating rupee dragged the stocks down in a volatile week and a big claw-back by the local unit vs dollar seems to be a must for the market to buck the trend amid uncertainties over IMF loan deal, traders said.

Arif Habib Limited in its weekly market review said stocks were expected to be range-bound in the upcoming week.

“Moreover, the new government is in talks with the IMF for a revival of the programme and a breakthrough is likely to spur buying activities in the market,” the brokerage said.

“Keeping in view the ongoing result season, certain sectors and scripts are expected to stay in the limelight.”

It said the market commenced on a positive note this week, while with a jump in international oil prices, exploration and production stocks saw significant investor interest.

“However, the positive momentum couldn’t sustain for long owing to economic concerns such as rupee depreciation (closing the week at Rs186.70) and IMF programme limbo,” the brokerage added.

Meanwhile, the trade deficit widened to $3.6 billion in March 2022, which further pressured the stocks.

In addition to it, a downward revision of the growth target forecast to 4 percent by the World Bank and a rise in treasury bill yields (~70bps) further suppressed the sentiment.

The market closed at 45,553 points, shedding 1,049 points (down by 2.3 percent) week-on week. Average volumes came in at 225 million shares, down 53 percent week-on-week, while average value settled at $41 million, down 39 percent week-on-week.

Foreign selling clocked in at $0.97 million compared to a net buy of $1.29 million last week. Major selling was witnessed in commercial banks ($1.74 million) and food and personal care products ($0.14 million). On the local front, buying was reported by individuals ($7.03 million) followed by companies ($0.87 million).

Sector-wise negative contributions came from commercial banks (396 points), cement (221 points), technology & communication (99 points), power generation & distribution (74 points), and miscellaneous (72 points). Stock-wise negative contributors were HBL (90 points), BAHL (85 points), LUCK (70 points), SYS (66 points), and PSEL (66 points).

Sectors that strengthened the index were oil & gas exploration companies (88 points), chemical (31 points), fertilizer (10 points), glass & ceramics (3 points), and textile spinning (1 point). OGDC (56 points), FFC (45 points), PPL (43 points), LOTCHEM (28 points), and EFERT (27 points) were the main supporting stocks.

Muhammad Waqas Ghani, an analyst at JS Research, said after peaking last week to 46,602 points on political clarity, stocks reversed gains over economic concerns.

On the news front, textile exports during Mar-2022 surged by 19.9 percent year on year while LSM posted a growth of 8.4 percent year-on-year during February 2022.

On the other hand, the country's petroleum and food imports swelled 60 percent year-on-year during 9MFY22. Crude oil prices declined during the week despite the production of 1.45 million bpd by OPEC, lower than its target for March, owing to demand worries.

Last week China Power Hub Generation Company (Pvt) Ltd warned Nepra of the closure of the power complex. SBP’s reserves went up by $36 million. KE sought Rs5.27/unit raise for March. July-March FDI declined 2 percent to $1.285 billion year-on-year. LSM expanded 8.6 percent in Feb 2022.