PSX loses 206 points for 2nd week amid inflation outlook

KARACHI: Pakistan Stock Exchange (PSX) edged lower for the second week in a row amid inflation outlook as well as rupee’s depreciation, with the benchmark KSE-100 Index shedding 205.91 points (-0.43 percent) on a week-on-week basis to close at 48,218.49 points.
The benchmark KSE-100 Index shed 161.31 points (-0.33 percent) in the preceding week after surging for four straight weeks. Overall, the index gained 4,011.52 points during the last six weeks. The KSE-100 Index has gained 6,765.51 points since the Staff Level Agreement (SLA) was signed with the International Monetary Fund (IMF) on June 30.
The market opened the week on a positive note on Tuesday, as Monday was a public holiday in connection with Independence Day. The Morgan Stanley Capital International (MSCI) integrated 15 stocks into the Frontier Markets Index in preceding week and this trigger kept the market in the green on Tuesday too. The market remained up due to increase in MSCI index participants from Pakistan and increase in weight.
However, the government increased prices of petrol and diesel for the next fortnight on late Tuesday night and due to inflation outlook, the bourse shed 419.32 points on Wednesday. A massive 15 percent increase in the price of petrol over the last few weeks and high inflation outlook dimmed positive sentiment at the PSX.
The PSX bounced back on Thursday to recoup some losses of the previous session; however, it remained volatile on Friday and closed the week in the red.
Foreign buying reduced to $2.38 million during the week as compared to $2.92 million in the preceding week. The sectors including technology and oil and gas exploration witnessed significant foreign buying of $1.45 million and $0.72 million, respectively. On the local front, banks remained major sellers with $3.9 million selling, followed by mutual funds ($1.62 million). Average trading volumes decreased by 32.6 percent on a week-on-week basis to 232 million shares, while the average traded value fell by 36 percent to $32 million.
More than two percent of the rupee’s depreciation against the US dollar during the week also kept the market under pressure. The rupee depreciated by Rs7.29 (-2.53 percent) against the US dollar during this week, as it opened at 288.49 on Tuesday and closed at 295.78 on Friday. During the current fiscal year 2023-24, Pakistani rupee has shed Rs9.79 against the US dollar in the interbank market, while it plummeted by Rs68.35 against the greenback in the current year.
In the coming week, stability for stocks is expected following the establishment of a caretaker cabinet. Moreover, there is also growing anticipation of strong financial performances in specific sectors and stocks, which could boost overall market momentum.
The benchmark KSE-100 Index is trading at a price-to-earnings ratio (PER) of 3.8x (2024), compared to its 5-year average of 5.8. Additionally, it offers a dividend yield of approximately 10.3 percent, a significant increase from its 5-year average of around 6.8 percent. – TLTP