The capital market on Monday saw selling pressure in financial scrips as investors reacted to Friday’s rate cut of 100bps and hints that the government would likely increase taxes in the upcoming budget for FY21 on the International Monetary Fund’s (IMF) demand, dealers said.
Ovais Ahsan, CEO at Optimus Capital Management, said, “The market closed in the negative zone driven down by banking stocks which reacted to the SBP's rate cut of 100bps last Friday.”
The broader market also saw selling pressure, as a 100bps rate cut was already built into expectations and investors chose to “sell on news” Ahsan added. Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index lost 0.60 percent or 203.36 points to close at 33,804.97 points level. KSE-30 shares index followed suit with a low of 0.70 percent or 103.80 points to end at 14,799.86 points level.
Of 344 active scrips, 143 moved up, 184 retreated, and 17 remained unchanged. The ready market volumes stood at 261.966 million shares, as compared with the turnover of 213.284 million shares in the previous session.
Salman Ahmad, head of institutional sales at Aba Ali Habib said the market was down because of a number of factors, including downward technical correction as the market was overbought, and Eid Holidays which would leave investors only a couple of days instead of week to rollover their future contracts.
Another factor for the downturn were the reports that the IMF has asked Pakistan government to enhance tax collection by more than Rs500 billion, which hints at more taxes on already heavily laden sectors under tax, squeezing the earnings, he added. Analyst Ahsan Mehanti from Arif Habib Corporations said, “Stocks closed lower on pre-budget uncertainty.” However, oil stocks outperformed on surging global crude oil prices and strong earnings for the quarter.
Investor concerns over IMF projections on surging government debt to 78.3 percent for FY20, reports of delay in CPEC projects, dismal sales of oil, autos and cement in April 2020, and concerns for ongoing foreign outflows played a catalytic role in the bearish close at the PSX, Mehanti added. Abdul Azeem, director research at Spectrum Securities said, “...investors were interested in building new positions in IT and telecom sector on expectation of massive growth after CVOID-19.”
However, cement sector was under pressure as investors preferred to reduce their position, expecting no further cut in policy rate and uncertainty in cement price hike, he added.
The market was unable to maintain the initial positive momentum and dipped in the negative territory.
Sector-wise data showed the banking sector rendered 117 points from KSE-100 index. Similarly, cement, fertiliser, and OMCs also contributed negative 58, 39 and 14 points, respectively.
The top gainers were Rafhan Maize, up Rs250.00 close at Rs7,399.00/share, and Nestle Pakistan, up Rs243.75 to finish at Rs6,933.75/share. Pakistan Services, down Rs72.45 to close at Rs893.64/share, and Sapphire Textile, down Rs69.21 to close at Rs853.74/share, were the main losers.
TRG Pakistan Limited recorded the highest volumes with a turnover of 22.525 million shares. Its scrip gained Rs1.78 to end at Rs25.55/share.
The lowest volumes were witnessed in Hum Network, recording a turnover of 6.202 million shares, whereas the scrip gained Re0.51 to end at Rs11.61/share.