PSX likely to pare gains in the coming sessions

KARACHI: Pakistan Stock Exchange (PSX) is likely to pare gains in a corrective trend in the coming week after the benchmark KSE-100 Index surged by 861 points (+1.95 percent) on a week-on-week basis on the back of massive foreign inflows.
The resumption of the International Monetary Fund (IMF) programme along with support from friendly countries continued to garner investor interest. The investor optimism remained strong following an agreement with the IMF. The IMF’s first tranche alongside deposits of $2 billion and $1 billion made by Saudi Arabia and the UAE, respectively, were the key positive triggers for the bourse.
The PSX maintained positive momentum during the week, starting from Fitch Ratings’ upgrade on Monday last after the International Monetary Fund (IMF) approved staff-level agreement with Pakistan in the previous week. Fitch upgraded Pakistan’s foreign currency issuer default rating from “CCC-” to “CCC”, fueling a rally at the PSX, which rose more than 300 points on Monday.
The positive trend continued on Tuesday on account of Saudi Arabia’s much-needed support of a $2 billion deposit to the State Bank of Pakistan (SBP) for one year as part of a plan to raise funds under a condition set by the IMF for the new package. The bull-run continued on Wednesday as well with the winning streak continuing for the third consecutive day ahead of the IMF’s board meeting for approval of a $3 billion standby arrangement.
However, the profit-taking gripped the market on Thursday, bringing the indices down despite the approval of the $3 billion loan. The downtrend continued on Friday where bears kept their control, dragging the index down by nearly 200 points over reports of a decline in the output of large-scale manufacturing industries (LSMI) in May 2023, rising government’s bond yields and a surge in industrial power tariff. As per Pakistan Bureau of Statistics data, 11MFY23 LSM posted a negative growth of 9.9 percent year-on-year as energy constraints and curbs on the import of raw material were the key impediments to the industries.
The benchmark index, however, managed to close the week above the psychological level of 45,000 points and settled at 45,067.98. Among other indices, the KSE All Share Index managed to remain above the 30,000 points level, closing at 30,329.14. On the other hand, KMI All Share Islamic Index managed to remain above the 22,000 points psychological level, closing the week at 22,315.79.
From a technical perspective, after reaching a high of 45,971 points during the week, the KSE-100 Index is likely to retest support at 45,256 points. A fall below this level may initiate a corrective trend, with potential targets at 44,990 and 44,385 points. Any upward movement is likely to face resistance in the range of 45,500-45,750 points. The Relative Strength Index (RSI) and the Stochastic Oscillator have both shown a downturn, further suggesting a corrective trend ahead.
According to experts, the market may experience a corrective trend in the coming week, influenced by various factors such as technical indicators, global economic conditions and investor sentiments. Market participants need to closely monitor the support and resistance levels, as well as any significant developments that could impact the market’s direction, they opined. – TLTP