OGDC movement to effect 19-point change

The Oil and Gas Development Company has become a trend-setter of the market following its inclusion in the KSE-100 index of the Karachi Stock Exchange and rupee movement would be expected to result in 19 points change.
The Karachi Stock Exchange (KSE) Board meeting held on March 29, 2004, recomposed the KSE-100 index and included in it OGDC, the most active scrip. The scrip will lead the index as it has the biggest weight stock in the KSE-100 Index.
"If calculated on the basis of March 29, 2004 prices, OGDC weight in the revised KSE-100 Index would be 21 percent, with PTCL weight declining from 17 percent to 13 percent," a report of Investcapital Securities said.
In the revised Index, a Re 1 change in OGDC would result in a 19-point change. In the old Index, when PTCL was the leader, a Re 1 change in PTCL was affecting the Index by 21 points.
The brokerage has analysed price performance of OGDC and PTCL in 2004 and found that OGDC is more volatile.
They have used two measures of volatility: Firstly, the brokerage has calculated year-to-date standard deviations for the two heavyweights.
OGDC standard deviation in 2004 to-date stands at 1.7 percent, based on daily price fluctuations. PTCL standard deviation over the same period is lower at 0.9 percent.
The other measure of volatility they have used is the intra-day price movement. In 2004 to-date OGDC has shown an average daily price movement range of Rs 1.2. On the other hand, PTCL average daily price movement range has been Re 0.5.
The new Index will be relatively more sensitive and volatile.
The brokerage house has used historical prices and applied them to the newly recomposed Index in order to gauge just how volatile the Index would have been over the period March 15-29. "Assuming that the Index was recomposed from March 16, we have found out that the standard deviation of the newly recomposed Index would have been 0.6 percent against 0.5 percent for the existing Index.
Also, the average daily change in the newly recomposed Index would have been 0.5 percent against 0.3 percent for the existing Index."
The report said that following the addition of PTCL in the index, there was an increase in volatility.
However, as PTCL stock found its way to longer-term institutional investors, as against speculators, volatility declined. "We may see the same with OGDC stock in the long run, as the stock's holding shifts from punters/speculators to large institutional investors," the brokerage house said.