KARACHI: Bulls kept control of the stock market for the eighth consecutive week though the KSE-100 index closed flat with modest gains of 261 points (0.65 per cent) and settling at 40,291.

The sideways movement of the index was attributed to profit-taking by investors after the benchmark had posted stellar gains of 19pc over the earlier seven weeks in a row. However, the market received support from improving macroeconomic indicators, a rapid drop in Covid-19 cases, stability in the rupee against the dollar and anticipation of satisfactory financial results to come up for the quarter in the following days.

However, the upsurge in index was kept in check by some unsavoury news such as the diplomatic spat between Pakistan and Saudi Arabia, the negative outcome of long-pending Gas Infrastructure Development Cess (GIDC) and the nervous investors’ decision to book profit due to the three-day holidays ahead.

The start of the week was dull with the market remaining under selling pressure in cement, steel, automobile, and exploration and production sectors. On Tuesday, the index rebounded on increase in international oil rates and prospects of reconciliation between Independent Power Producers and the government which pushed up the prices of shares in the energy chain.

Early on, stock prices of the fertilizer sector also rose. The stumbling block in the outgoing week was the announcement of Supreme Court reserved verdict on Gas Infrastructure Development Cess (GIDC) which directed that a massive amount of Rs457bn be paid by the industries to the government coffers. It saw shares tumble in the fertiliser, cement, steel, chemical and textile as the decision entails cashflows for corporates in those sectors.

It was reassuring to see foreigners turn net buyers of tidy amount worth $8.4 million, up from the preceding net purchases of $3.7m the past week. Portfolio inflow was seen in cement at $4.3m and fertiliser $2.7m. Among domestic participants, banks recorded major selling of stocks valued at $10.7m, followed by insurance selling $5.4m. Average volume stood lower by 9pc to 581m shares while the mean daily traded value dropped 14pc to $125m.

Brokerage Arif Habib Ltd reported that contribution to the index upside was led by power generation and distribution, higher by 261 points, oil and gas exploration companies 97 points, oil and gas marketing 92 points, commercial banks 86 points, and textile composite 29 points.

Scrip-wise major gainers were Hub Power, increasing by 213 points, Pakistan Petroleum 56 points, United Bank 56 points, Kot Addu Power 39 points, and Sui Northern Gas 36 points. Whereas, top losers were Dawood Hercules, down 55 points, Engro Corporation 49 points, MCB 31 points, Engro Fertiliser 25 points and Fauji Fertiliser 23 points.

Going forward, pundits expect the market to maintain its northwardly direction, supported by the cyclical sectors including cement, steel, textile and automobiles. Investors may also be encouraged to turn to the equity market for better returns in the face of falling prices of gold, declining returns on banks deposits and National Savings Schemes, and lack of meaningful activity in the real estate and the construction industry.

Stability in the rupee-dollar parity amid notable improvement in macros including recovery in exports, reduction in trade deficit and industrial activity getting back to normal post-pandemic, all provided investors the most needed comfort.

Published in Dawn, August 16th, 2020