The share market gained 2.2 percent during the preceding week as Saarc Summit in Islamabad closed on a positive note where Pakistan and India reached an agreement that they will hold talks to ease tension within the region and will take steps to cut poverty and promote trade.
The outcome of the Saarc summit helped stocks settle at higher level than previous week's close. The index rose from 4,473.93 to 4,570.14, translating gain of 2.15 percent or 96 points, highest level since September 15, 2003.
Generally , positive development of relations between India and Pakistan, including a meeting between President Musharraf and Indian Prime Minister Vajpayee, drove stocks higher on the first three days of the week.
The Saarc-led mini-rally peaked on Wednesday when the index rose by 1.12 percent in response to news that Pakistan and India intend to hold peace dialogues next month to resolve all outstanding issues, including Kashmir.
Similar to last week's trading pattern, the index fell only one day in the week as Thursday's session marginally returned some of the gains in response to news that Kuwait Petroleum is reconsidering options for the PSO bidding.
However, the last trading session of the week helped recoup the small decline as the index closed at well over the 4500 mark.
With continued absence of significant news from the corporate front, the direction of the market during the current week will primarily be driven by political developments.
Particularly, after the successful completion of Saarc, the market will be looking for solid actions to back up the verbal gestures made by both India and Pakistan during the summit.
Although neither side is likely to make any radical move, there is an expectation that some steps will be taken to solidify the goodwill that has been developing between the two countries.
The delivery of OGDC shares to shareholders is also likely to impact trading. More precisely, trading in the shares of the company is likely to become more volatile.
Given the large volume with which OGDC has been trading over the past few weeks, this volatility is likely to carry over to the index as well.
The much-awaited one-on-one talks between President Musharraf and PM Vajpayee fuelled the market, which moved up by 59.5 points in the early trading. PIA kindled investors' interest and remained one of the volume leaders, closing 4 percent up at Rs 21.60.
It seems that resumption of air links with India and other South Asian countries, as well as the awaited arrival of one Boeing 777 this month would ensure that the stock remains a hot item for speculators, although analysts maintain their negative stance on the stock due to its continuing earnings dilution.
Engro continued its strong move on good volumes on expectations of a good result and its expected participation in bidding for a cellular licence with Vodaphone. Cement stocks remained favourite items on the counter and initially most of the stocks moved in an upward direction.
News of a 14 percent Year-on-Year increase over half year's sales figures was one of the main reasons for the rally in the cement stocks.
The market needs a correction and the index is expected to take a breather soon. Day trading should be the name of the game for the time being.
Sumira Dada from Elixir Securities said that the market was struggling to breach its previous all-time high of 4604 despite institutional support in select stocks at these levels.
Liquidity is not the problem at these levels; rather it is the lack of fresh positive news which is holding the market back.
With the settlement date of OGDC (January 22) approaching, the stock has become highly speculative once again with the same players trading both ways on the stock according to their whims.
When the stock was trading at around Rs 40 it was expected that OGDC would hit Rs 60 before coming on the ready board, but it seems that the movement of OGDC is not giving any clear signals at these levels.
Although the stock made a high of Rs 56.20 in December but, with the index now trading around its all time high, it is not worth taking a risk in OGDC.
Atiq Ahmed, research analyst from Capital One Equities, said that the momentum indicator remained overbought for the last ten trading sessions where the indicator supported first and third-tier stocks.
"According to our research, the bottom line is that the market is trying to reach its exhaustion point on short-term basis and our tech figures strengthen this analysis. However, on long-term basis, the spread, volume and demand show no divergences and still indicate to higher prices. With that in mind, we should realise our profits, and wait for a major correction as an opportunity to take new positions. Key resistance levels are 4600 and 4645."
PTCL closed at Rs 37.25 and broke its consolidation phase (Rs 36.55-Rs 37) after eight trading sessions.
The stock is now in a position to attain the Rs 37.85 level, which would edge up towards the Rs 38.75 as well as the relative strength of the scrip as this is in neutral zone and the stock is likely to touch the above-mentioned levels in near term.
Key resistance levels are Rs 37.85 and RS 38.75.
After December 2, 2003, Hubco is moving in a narrow trading band between Rs 37.90 and Rs 39.50. However, the stock is trading above its 10-100 day weighted moving average (positive sign). "We expect that if Hubco breaks its Rs 39.50 level then it would be able to continue its rally, which was broken on December 24, 2003.
In addition to this, if this rally continues then the stock can be stretched towards Rs 40.25 and Rs 42.75. Key resistance levels are 38.90 and 39.50.
PSO lost Rs 9.15 during the eight trading session. The scrip is now in a position to take off in the near future.
The relative strength index (RSI) of the scrip is far below the index's RSI, which means the scrip has the intensity to obtain its pervious level of Rs 283.20, which will eventually prop up the stock close to the 287.10 mark. Key resistance levels are 283.20 and 287.10.
Pakistan Oilfields has been showing lacklustre performance during the last two weeks. Moreover, the stock is trading below its 10-day weighted moving average, which indicates a negative sign.
At current price level, the company many bounce back towards its important resistance level at 234.90, which would pave the way towards 237.90. Key resistance levels are 234.90 and 237.90.
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