Last week was very expensive for the stock brokers and investors, who suffered heavily because of panic selling, caused by overbought situation of the market, although big players blamed a news report regarding the collection of share data of the bourses by the Central Board of Revenue (CBR) for the blow.
It was a dark week on the Karachi Stock Exchange (KSE) and the Lahore Stock Exchange (LSE) where equities received heavy blow forcing investors to recall the March 2005 crisis of Pakistan stock market, a broker remarked.
He said the market is still directionless and nobody knows what will happen in the upcoming week. Therefore, small investors and traders should refrain from being part of the market activity under the persisting certainty, he added.
According to analysts, the market was heavily overbought, especially banks and the oil and gas sector had gone far beyond their fair values, thus what happened in the past week was not an unusual phenomenon. "If we look at the past, whenever the market got overheated, it underwent massive corrections, which resulted in steep equity falls," an analyst said while commenting on what happened during the week under review.
In two of five sessions of the week, the market depicted recovery signs, but failed to maintain the trend because of over-priced situation. Even positive report of a final agreement between Privatisation Commission and Etisalat for PTCL take-over was also overshadowed by the panic selling.
The LSE-25 index lost 526.7 points or 9.4 percent closing at 5,075.41 as compared to 5,602.11 points. The turnover slipped back to 47.391 million shares from 61.599 million shares, registering a decrease of 14.208 million shares or 23.06 percent.
Share values crashed on first day of the week under review following panic selling, which was seen across the board, with the index losing record 271 points. Equities suffered heavy falls on account of massive pressure while LSE-25 index descended to 5,330.81 points from 5602.11, registering a net loss of 271.30 points or 4.84 percent. The volume retreated to 57.743 million shares from 61.599 million, denoting a fall of 3.856 million shares. The market started trading on a weak note with heavy pressure in the oil and gas sector like PSO, PPL, OGDC, etc.
Analysts said that 'baffling outcome' of US President's visit to Pakistan was the key factor for triggering panic selling. Cement stocks, especially in the early session, resisted pressure, but failed to sustain the resistance and in second half of the session came under pressure.
The oil and gas sector was the major victim with all prominent shares in the sector reaching their lower cap limits. Equities recovered a part of Monday's losses on the second day on the basis of fresh buying. The LSE-25 index improved by 93.26 points, closing at 5,424.07 against 5,330.81. The turnover increased to 66.605 million shares from 57.743 million. Banking, oil and cement sectors helped the market improve while Dewan Salman Fibre and Union Bank remained under pressure.
People witnessed another black day on Wednesday when the index lost 264 more points following panic selling. The LSE-25 index slipped to 5,159.84 points from 5,424.07 of Tuesday, while the volume lowered to 51.010 million shares from 66.605 million shares. After partially resuscitating from first days historic crash, the market underwent another heavy bearish spell, which forced the index to shed 264 points.
According to analysts, the market was heavily overbought saying some key chips had crossed their fair worth, therefore, it failed to sustain at the current price levels.
The Lahore bourse staged a partial recovery on the fourth day from petroleum and banking sector led heavy falls of the preceding session, due to late session interest emerging in Bank of Punjab, Adamjee Insurance, fertilisers and OGDC, enabling the index to gain over 2 percent.
The LSE-25 index finished at 5,280.15 points as opposed to previous 5,159.84, registering a net gain of 120.31 points. The volume also improved to 63.548 million shares from 51.010 million.
There were no signs of recovery of the market when trading resumed in the morning, as almost all key chips moved in the minus column because of heavy selling pressure. In early hours, the index was down over 200 points but later it started recovering and finally closed 120 points up due to contradiction of news by CBR about collecting shares information by it.
According to analysts, the CBR denial played a key role in that day's recovery. The share market again failed to maintain the rising tempo on last trading day of the week and fell victim to selling pressure, notably emerging in National Bank and PPL.
The LSE-25 index retreated to 5,075.41 points from 5,280.15, registering a fall of 204.74 points. The volume further decreased to 47.391 million shares from 63.548 million. The market showed negative vibes right from beginning to the close while pressure from the institutions in the second session adversely affected the sentiment. In second session, institutions off-loaded, resulting in sharp equity falls.
"The way the market has behaved in the past week, we can assume that a reversal of the trend has started," an analyst said, adding the levels from where the market took a downward turn were very high and did not match with the actual worth of the index.
He said the outcome of US President's visit and news of collection of stock markets data in bourses were also factors for the downtrend, but as a matter of fact, the market was highly overheated and the levels of certain scrips were much higher as compared to their fair values. Now almost all the companies have announced their results and investors have lost interest in the market, therefore, 'selling on strength' should by the policy at the moment. NBP results could cause a spark in the market, but it will be short-lived, he viewed.
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