Stocks seen trigger-sensitive in range-bound trade

Stocks had a thin week owing to economic concerns amid uncertainty with respect to commercial activity; however strong triggers might give the otherwise range-bound market a much-needed impetus next week, dealers said.

The index on weekly basis showed mixed pattern as continuous depreciation of rupee and fall in crude oil prices erased share values but consolation came from the central bank cutting the rate for the fifth time in current fiscal year aimed to give stimulus.

Pakistan Stock Exchange's (PSX) benchmark KSE-100 shares index surged 1.5 percent or 501 points to settle at 33,939 points during the outgoing week.

Brokerage BMA Capital Management in a report said, “We expect the market to look forward to the start of FY21 as multiple developments on the macro front are due next week”.

Macro data points include inflation for the month of June 2020 and forex reserves reflecting influx of dollars, the brokerage said. "We expect the market to remain trigger-sensitive and eye any correction as opportunity to accumulate,” BMA report said.

Average Volumes settled at 177 million shares (down by 23 percent week-on-week), while average traded value clocked in at $35 million (down by 16 percent week-on-week).

Brokerage Habib Metro-Financial in a note said, "On the basis of the current economic activity and future outlook we expect the market to remain range-bound but tilt more towards bearish sentiments, with movement hinging upon economic and political factors for the short-term”.

The index’s direction would depend mostly upon an improvement in COVID-19 situation and the entailing economic recovery, the brokerage report said.

Analysts from brokerage Arif Habib Limited, said, "We expect the market to remain positive in the upcoming week. Since COVID-19 cases have started to decline day-on-day basis, investment sentiment is expected to improve".

With inflow of funds from ADB and World Bank, PKR/USD parity was expected to stabilise in the upcoming week, the analysts added.

“With monetary policy announced, we expect investors to cherry-pick scrips from cements, OMCs and fertilisers sector,” the analysts said.

The market commenced on a positive note during the outgoing week. However, sentiments turned negative amid plunge in international oil prices during the mid-week.

Furthermore pressure from downturn in international markets owing to concerns over a possible second wave of COVID-19 was also felt in local bourse.

With monetary aid received during the week from Asian Infrastructure Investment Bank, ADB, and World Bank worth $1.75 billion, followed by current account turning surplus with $13 million in May 2020, the investors are expecting the economy to find some stability down the line.

Foreign selling last week clocked in at $9.9 million, compared to a net sale of $4.8 million a week earlier. Selling was witnessed in fertilisers ($2.7 million) and commercial banks ($2.6 million). On the domestic front, major buying was reported by insurance companies, ($7.0 million) and mutual funds ($3.4 million).

Sentiments shifted towards green side. Along with this, SBP’s 100 basis points cut that brought the policy rate down to two-year low further strengthened the sentiment. Furthermore, extension in FATF’s deadline also provided a breather to investors.

The rupee continued its downward trend against the USD from the last two weeks, exhibiting a further decrease of Rs.1.01/dollar. The market is currently trading at attractive levels warranting attention to fundamentally sound scrips at these levels to capture gains in the medium to long run.

Sector-wise positive contributions came from fertiliser (326 points), cements (108 points), power generation & distribution (46 points), oil & gas marketing companies (34 points), and auto assemblers (31 points).

However, sector-wise negative contribution came from commercial banks (90 points), tobacco (13 points), and pharmaceuticals (8 points).

Scrip-wise positive contributions were led by FFC (101 points), ENGRO (95 points), DAWH (78 points), EFERT (47 points) and HUBC (44 points).