Stocks down on inflation amid ‘tough budget’ buzz

Stocks fell on Wednesday after concerns over inflation, which hit a 28-month high in May, sparked off a selling spree amid the market buzz the upcoming budget is going to be a punishing one, traders said.

Profit-taking remained the order of the day, which led the market to snap a five-session winning streak in topsy-turvy trade.

The Pakistan Stock Exchange's (PSX) benchmark KSE 100-share Index closed lower by 322.10 points or 0.75 percent to 42,756.04 points against 43,078.14 points recorded in the last session. The highest index of the day remained at 43,149.17 points while the lowest level of the day was recorded at 42,718.73 points.

“The market came under pressure as investors are bracing for adverse budgetary measures for next fiscal year,” said Arif Habib Ltd (AHL) in a post-market note.

According to the brokerage report, it was mainly a new wave of concerns over the runaway inflation that forced the market players to distance themselves from taking new positions.

“Though mainboard activities remained dull, third tier stocks recorded high trade volume,” the AHL report said.

The major losers were power (-67.8 points), banks (-65.7 points), cement (-55.2 points), technology (-41.1 points), and energy exploration and production (-32.4 points).

KSE-30 Shares Index also hit a loss of 157.93 points or 0.96 percent to end at 16,295.55 points.

For obvious reasons volumes shrank by 91 million shares to 194.398 million shares from 285.348 million shares. The trading value slumped to Rs5.349 billion from Rs7.388 billion.

Turnover in the future contracts rose to 62.311 million shares from 58.06 million shares.

Market capital narrowed down to Rs7.113 trillion from Rs7.136 trillion. Out of 334 companies active in the session, 98 closed in green, 207 in the red while 29 remained unchanged.

Topline Securities said expectation of higher inflation down the line coupled with the withdrawal of fuel and energy subsidies in the upcoming budget, due on June 10, 2022, muted the trade,” he said.

Major laggards were HUBC, UBL, and FFC, while EFERT and MARI closed higher.

Rafhan Maize stole the show by rising Rs330 to Rs10,030/share, followed by Nestle Pakistan, up Rs70 to Rs5,780 per share.

Bata Pakistan lost most of its shine as it shed Rs49.99 to Rs1,850/share, followed by Ismail Industries that fell Rs33.74 to Rs475.11/share.

Arif Habib Corp’s top analyst Ahsan Mehanti said stocks fell across the board after CPI-based inflation clocked in at 13.7 percent year-on-year for May 2022, while a holdup in the restoration of the IMF programme also dented sentiment.

Expectations the government might raise energy prices further to bring the IMF loan online added to the selling pressure, he said.

Silk Bank Ltd was the most traded stock. It recorded a turnover of 24.628 million shares to close lower by one paisa to Rs1.49 per share. The next was Unity Foods Ltd with 14.095 million shares. It lost 47 paisas to close at Rs22.30 per share.

Other volume-makers included Ghani Global Holdings, Pakistan Refinery, Fauji Foods Ltd XD, TPL Properties, Cnergyico PK, Telecard Limited, WorldCall Telecom and Pakistan Reinsurance.