Stocks to trade sideways as elections loom

KARACHI: The stock market is expected to trade in a narrow range next week, as investors will be cautious ahead of the general elections on Feb. 8 and a shortened trading week due to public holidays, analysts said on Saturday.

“In the upcoming week, we expect the market to remain range-bound as investors will be closely monitoring the general elections on 8th Feb’24,” said brokerage Arif Habib Ltd. “Furthermore, the number of trading days will be limited due to public holidays.

With the ongoing result season, certain scrips will remain under the limelight on the expectation of robust results.”

During the outgoing week local bourse remained depressed, owing to political noise coupled with uncertainty related to circular debt resolution.

The central bank's reserves reduced by $54 million, reaching $8.2 billion. During the week rupee closed at 279.41 against dollar, strengthening by 0.07 percent week-on-week.

The market closed at 63,003 points, declining by 810 points or 1.3 percent week-on-week. Average volumes arrived at 313 million shares (down by 24.7 percent week-on-week) while the average value traded settled at $41 million (down by 43.2 percent week-on-week).

Foreign selling continued during this week, clocking in at $9.7 million compared to a net sell of $22.7 million last week.

Major selling was witnessed in commercial banks ($2.7 million) and cement ($2.2 million). On the local front, buying was reported by insurance companies ($7.0 million) followed by broker proprietary trading ($1.5 million).

Sector-wise negative contributions came from fertilizer (181 points), oil & gas marketing companies (130 points), chemical (121 points), technology & communication (86 points) and power generation & distribution (66 points). Scrip-wise negative contributors were COLG (105 points), MARI (94 points), PPL (80 points), EFERT (77 points), and PSO (64 points).

The sectors which mainly contributed positively were automobile assembler (88 points), cable & electrical goods (7 points), insurance (7 points), and pharmaceuticals (3 points). Scrip-wise positive contributions came from OGDC (122 points), MTL (80 points), MCB (78 points), BAFL (22 points), and AKBL (8 points).

Analyst Nabeel Haroon at Topline Securities said the decline in the market can be attributed to selling by foreign corporations and investors' preference to exit the market before the upcoming election on February 8, 2024.

Major economic numbers that came in during the week were: CPI Inflation for Jan 2024 clocking in at 28.34 percent year-on-year (as compared to 29.66 percent in Dec 2023) and Pakistan's trade deficit for Jan 2024 coming in at $1.9 billion (down 25 percent year-on-year while up 7 percent month-on-month in Jan-2024) as reported by PBS.

Analyst Shagufta Irshad at JS Research said domestic politics continued to drive market sentiments where the investors largely ignored corporate announcements during the last week before the general elections.

Despite law & order issues in some constituencies, the ECP and the caretaker government remained committed to conducting elections on time.

The State Bank of Pakistan (SBP) decided to keep the policy rate unchanged at 22 percent. "The decision came in line with market expectations," she said.

The SBP also hinted at potential disinflation and softening of interest rates going forward.

During the week, petrol prices were increased by Rs13.55/litre while diesel prices were raised by Rs2.75/litre owing to an increase in ex-refinery prices.