As the holy month draws nearer, shops and markets across the country are flooded with buyers stocking up on food supplies for Ramazan. A few weeks later, as Eid approaches it will be the turn of traders dealing in clothing, electronics and other consumer goods to shine their shops.
But while each type of market rakes in customers and profits at different times during Ramazan each year, traders at the Karachi Stock Exchange and other local bourses have generally stayed away from aggressive trading during this period.
Historically, trading volumes at the country’s premier bourse have dropped during the holy month. Since 2007, trading volumes for the 100-index have typically plunged when compared to the 60 days prior to 1st Ramazan.
Talking to BR Research, market guru and renowned philanthropist Aqeel Karim Dedhi listed reasons for diminished activity at local bourses: “market timings are shorter; many investors are abroad performing Umrah while others still active in the market steer clear of leverage during this period, thus reducing the quantity of shares they deal in.” Dedhi himself stays sidelined from the business, preferring to concentrate on prayers and charity in the holy month.
But 2013 has been an exceptional year for local bourses. The rise of the KSE-100 index during the year-to-date is above and beyond the gains registered over similar periods since FY05. And it seems that market activity in Ramazan will also buck the historic trend this year.
Historically, the lower volumes in Ramazan led to insignificant changes in market direction during the holy month – sans two exceptions. In FY08 there was zero change due to price floor in the aftermath of the famous financial crisis, and in FY09 the market recovered as local equities were re-initiated into international indices after their fall from grace in the previous fiscal year.
And it appears that this time around will be an exception as well. Market participants point out that overall market sentiment is positive on the back of successful negotiations between the new government and the IMF. This year the holy month also coincides with result announcements that are due mid-July onwards.
For these reasons, volumes as well as the benchmark index are likely to remain strong in coming weeks with some market participants even eyeing the 25,000 level for KSE-100.
While that target may be a bit too bullish to be reached in Ramazan, moves towards it could ensure that the brokers that usually stay out of the market in the holy month, will be busy in aggressive trade in this Ramazan.
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KSE-100 avg volumes before & during Ramadan
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2007 2008 2009 2010 2011 2012
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60 days before Ramadan 197 77 114 65 49 99
During Ramadan 184 9 173 35 41 57
Chg in volume -7% -89% 52% -45% -15% -42%
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Source: KSE
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