Daily Times

After closing the fourth successive week in the green zone, the Pakistan Stock Exchange (PSX) may witness cautious trading during the week starting today (Monday); however, there is likelihood that benchmark KSE-100 Index could hit 48,000-point barrier if there is any positive news from the International Monetary Fund (IMF).

The expectation of positive conclusion of talks between Pakistan and IMF for the resumption of the Extended Fund Facility (EFF) is the key that can keep the PSX in green territory. Though the interest rate may rise following the IMF package, the market is already expecting up to one basis point increase in the policy rate following increase in treasury bond yields.

The KSE-100 Index closed at 47,295.8 points, climbing up by 1,111 points (+2.4 percent) during the week. The market commenced on a positive note this week since the government was able to convince the banned outfit Tehreek-e-Labbaik Pakistan (TLP) to call off its protest in the federal capital. Moreover, rebound in the rupee value against the greenback, substantial reduction in the international coal prices and narrowing of trade deficit on a month-on-month basis by 10 percent further strengthened the sentiment. Prime Minister Imran Khan’s announcement of Rs120 billion subsidy package on essential food items further kept the momentum robust. Though profit-taking was witnessed briefly in a few scrips, the sentiment remained unchanged.

Foreign selling continued this week, clocking in at $11.2 million, compared with a net selling of $2.7 million last week. Major selling was witnessed in commercial banks ($5.6 million) and fertilizer ($1.4 million). On the local front, buying was reported by individuals ($14.5 million) followed by insurance companies ($6.5 million). Average volumes clocked-in at 430 million shares (up by 2.4 percent WoW) while average value traded settled at $89 million (up by 121 percent WoW).

Sector-wise positive contributions came from technology (490 points), fertilizer (136 points), refinery (115 points), OMCs (36 points), and textile composite (33 points). Whereas, sectors which contributed negatively were textile weaving (14 points) and paper & board (9 points). Scrip-wise positive contributors were SYS (241 points), TRG (210 points), MEBL (72 points), NRL (48 points) and FFC (41 points). Meanwhile, scrip-wise negative contributions came from UBL (38 points), LUCK (35 points) and HBL (33 points).

The week also saw an appreciating rupee against the dollar, while the three-month treasury bill cut-off yields rose 25bps to 8.5 percent (125bps above the policy rate) in the latest auction.

On the economic front, the Federal Board of Revenue’s (FBR) collection for October 2021 continued the robust growth trajectory with 33 percent growth. Moreover, the Consumer Price Index (CPI) inflation for the month was registered at 9.2 percent.

The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 5.0x (2022) compared to Asia Pacific regional average of 14.6x while offering a dividend yield of 8.4 percent versus 2.2 percent offered by the region.

According to analysts, “Going forward, we expect the market to move both ways; hence, we recommend investors to adopt a buy on dip strategy in the upcoming week.” They opined that with the IMF and Pakistan expected to reach an agreement soon, the investors’ sentiment is anticipated to be upbeat, whereas the current macroeconomic concerns such as higher inflationary reading due to jump in the petroleum prices could keep the market range-bound.