The stock market has fundamental values and investors should pick scrips accordingly, this was stated by adviser to Employees Old-age Benefits Institution (EOBI) Farooq Awan during an interview with AAJ markets on Friday.
He said that the market is in an indecisive phase, which is a natural phenomenon witnessed throughout the world after marking historical highs. "Bulls and bears are active in the market, bulls believe market fundamentals are strong and think it's still worth investing whereas bears relate market on historical ground and believe market is expensive at current levels".
He said if price earning ratio calculation (P/E) is based on historical data, indeed it would make current market a little bit expensive but if calculation is based on future prospects with one year horizon then it is not high at 10.25x P/E.
Awan said there is no harm if investments are made on index performance but then index should reflect true market picture, but unfortunately KSE-100 is not a true market representation although it has been discussed many times but there is no progress on the issue.
He was of the view an index should be free-float adjusted and a few scrips should not contribute overwhelmingly in the index composition. He said big players understand this and use these heavyweights for their benefits. Recently the OGDC was heavily sold to create this bearish spell, he added.
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