What is the face of resistance in Pakistan these days? It is the 48,000 mark at the KSE-100. And the support it had at 47,000 seems to have been put to sterner tests recently. The see-saw at the stock market has continued for over 50 trading sessions, where the 100 index has stayed moved within 2 percent since last touching 48,000. The daily movement has narrowed to less than 1 percent of the index for four straight months, as the market struggles to find an anchor to sway either way, decisively.
The index is now kissing 100 day moving average again for the first time since May 2021. Barring the 2020 Covid induced dip, that has largely proved to be a strong support, signaling rebound. Thus, the downside may still be limited, based on history. But there appears no trigger to let the index break the resistance it faces on various levels beyond 47,000.
This is despite yet another stellar quarter in terms of earnings growth, as blue chips and others have reported sizeable profit growth, both year-on-year and sequentially. There are few jitters on the macroeconomic front, on external account and currency – but nothing too disturbing to the extent of altering the medium-term view.
The interest rates have so far stayed at 7 percent and the forward guidance suggests that upward movement, if any, will be phased. Covid’s ongoing fourth wave seems to have a say in how the market is struggling to find momentum. The chances of extreme movement restrictions have dwindled over time, but they keep making a comeback in some form or another. Covid’s relation with the benchmark index has been a pretty strong one. Nothing suggests Covid is going anywhere anytime soon, despite the rather surprisingly encouraging vaccination drive.
A look at the sectoral indices tracked by Khi Stocks shows the heavyweight scrips have not fired yet. Technology, automobile, cement, and food sectors continue to be the outperformers, for various reasons. The ones with the highest weightage in index composition such as commercial banks, oil and gas, and fertilizer continue to struggle – underperforming an index that has itself hardly been an inspirational story in 2021 to-date. The more you look at sectoral indices, the more you know the stock market won’t budge much, unless the big guns go all blazing.
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