PSX rises 0.84pc WoW ahead of monetary policy decision

KARACHI: Pakistan Stock Exchange (PSX) managed to register gains on week-on-week despite losing over 1,000 points in the last two sessions, with the benchmark KSE-100 Index gaining 530.84 points (+0.84 percent) to close at 63,813.06 points.
The market opened on a bullish note on Monday, buoyed by reports of the government’s planning to inject Rs1,250 billion into the energy sector to alleviate circular debt as well as restoration of diplomatic relations with Iran. Stocks continued to rise on Tuesday and breached the 64,000 points barrier in a rally powered by the strengthening rupee and foreign corporate inflows. Bulls maintained their hold on Wednesday as well when the index extended its rally and closed near the 65,000 mark on optimism about the settlement of circular debt.
However, things reversed on Thursday and the market registered losses as investors opted for profit-booking in the wake of uncertainty about the circular debt reduction plan. On Friday, investor speculation about the upcoming monetary policy and worries over the growing circular debt took their toll on the PSX, which shed 485 points. Moreover, there was also a bit of profit-taking as well, on account of the final trading session of the week. The benchmark index shed 1,009.37 points during the last two sessions of the week.
The Pakistani rupee stability and a rise in the central bank’s foreign exchange reserves aided the market’s momentum. However, pre-poll uncertainty and scepticism about the circular debt reduction plan barred many market players from building their portfolios.
Investors are eagerly awaiting the upcoming monetary policy decision scheduled for January 29, as it is expected to be a key driver for the stocks in the coming week. Though various polls indicate that the State Bank of Pakistan is likely to maintain the policy rate at 22 percent, there is speculation among some analysts that a surprise cut in the policy rate may be on the horizon. There was a noticeable decline in cut-off yields for the 3-month, 6-month, and 12-month MTBs by 50bps, 56bps, and 62bps, respectively. The SBP’s reserves also increased by $243 million, reaching $8.2 billion.
Despite the fluctuations, the Pakistani rupee closed at 279.59 against the USD, strengthening by PKR 0.31 or 0.11 percent WoW.
Sector-wise, positive contributions were observed from oil & gas exploration companies (319 points), commercial banks (273 points), fertilizer (114 points), cement (30 points), and leather & tanneries (25 points).
On the flip side, negative contributions came from technology & communication (124 points), power generation & distribution (63 points), miscellaneous (33 points), automobile assembler (28 points), and paper & board (13 points).
Notable scrip-wise positive contributors included OGDC (336 points), EFERT (131 points), BAHL (114 points), MEBL (75 points), and HMB (63 points). Conversely, scrip-wise negative contributions came from PPL (81 points), SYS (66 points), FFC (55 points), HUBC (41 points), and PSO (32 points).
Foreign selling persisted during the week, totaling $22.7 million compared to a net sell of $1.2 million in the previous week. Major selling was observed in commercial banks ($6.7 million) and fertilizer ($4.5 million). On the local front, buying was reported by insurance companies ($9.6 million) followed by companies ($8.1 million). Average trading volumes increased to 416 million shares, up by 6.9 percent WoW, while the average value traded settled at $73 million, up by 47.5 percent WoW.
As the market awaits the monetary policy decision, investors remain cautious amid the potential for surprises that could influence market dynamics. The outcome of the decision is likely to have a significant impact on stock movements in the upcoming week. – TLTP