Data-driven rally peters out as PSX succumbs to late profit-taking spree

Stocks on Wednesday went on a roller coaster ride, reversing a multi-session rally as risk-averse investors resorted to profit-taking in an overbought market amid heightened political uncertainty.

The Pakistan Stock Exchange's (PSX) benchmark KSE-100 Shares Index retreated to 95,546.45 points, down 310.21 points or 0.32%, from the previous close of 95,856.66, after hitting a day high of 96,711.33 points.

While the rally reflects broad-based optimism, market correction emerged midday.

Ahsan Mehanti, Managing Director and CEO of Arif Habib Commodities, attributed the bearish trend to the prevailing political and economic instability, stating: “Stocks bearish on political uncertainty and security unrest in the country. Rupee instability, foreign outflows, and pending IMF board decision over government's alternate levies to minibudget triggered the bearish activity.”

The market sentiment may have been dampened by heightened political noise, including the planned protest on November 24 by an opposition party, and escalated security concerns due to militancy.

Samiullah Tariq, Head of Research and Development at Pakistan Kuwait Investment Company (Private) Limited, commented, “The market is taking correction today as it has gained significantly during the year.”

Sectors, including cement, banking, fertiliser, oil and gas exploration, oil marketing, and power generation remained in the limelight.

Notable gains were posted by index-heavy names such as K-Electric, Pakistan State Oil, Shell, Oil and Gas Development Company, Pakistan Petroleum, Mari Petroleum, Meezan Bank, National Bank of Pakistan, and Habib Bank.

Factors supporting the rally are falling inflation, a 32% year-on-year surge in Foreign Direct Investment (FDI) to $904 million during July-October, and a current account surplus of $349 million for October 2024.

The State Bank of Pakistan (SBP) reported that October marked the third consecutive monthly current account surplus, driven by a 7% month-on-month and 24% year-on-year rise in remittances.

Foreign exchange reserves have also reached a two-year high, with projections exceeding $11 billion in the coming weeks.

Inflation trends further bolstered investor sentiment. November’s Consumer Price Index (CPI) is projected to fall between 4.5% and 5%, marking a historic decline—the first time in 78 months inflation is anticipated to drop below 5%. For FY25, inflation is expected to average around 7.5%.

The technology sector led the rally, supported by a significant rise in export remittances from the Information and Communication Technology (ICT) sector. Remittances surged 34.9% year-on-year to $1.206 billion during July-October 2024, with October alone witnessing a 38.6% increase to $330 million.

This follows Tuesday’s remarkable session, where the KSE-100 Index touched an intraday peak of 96,036 points before closing at 95,857, marking a gain of 860.99 points or 0.91%.