The stock market during last week remained depressed as a host of negative rumours overpowered the investors'' sentiment and their interest was at the lowest ebb, reducing the average daily volume.
During the week, KSE-100 Index went down by 0.7 percent, or 175 points, to 11511.54. The market remained in the range of 11300-11850 for the whole week.
The major reasons behind the low activity in the market were: a) rumour regarding upward revision in discount rate, b) downward revision of Pakistani companies'' weightage in MSCI, and c) Rumour about further tax on stock market activity.
The market commenced on a positive note on commencement of the week, rising by 89 points on Monday, followed by four consecutive declining sessions with a cumulative plunge of 264 points. On the whole, the index fell by 175 points, to close at 11512 as against 11686 on Friday.
Turnover also thinned as average daily trading volume during the week fell to 250 million shares compared to 295 million shares traded previously. This dullness emanated from various factors, mainly that of the reduction in MSCI''s weighting in the Pakistan market from 0.27 percent to 0.22 percent despite the inclusion of one more company (UBL) and a continuing fall in cement prices boding negatively for the cement sector.
Lack of investor confidence was evident from the fact that not even positive news such as the announcement of the privatisation of various entities and implementation of the reduced anti-dumping duty on Pakistan''s bedlinen export to the EU.
As mentioned in previous weekly review, a volatile trend was anticipated to persist until the announcement of the budget, which would then determine the trend of the market from June 5 onward, shortly followed by expectations of privatisation-related developments.
Last week proved to be quite dull for the market, with investors mostly preferring to remain on the sidelines. This was evident from the low trading volume. Non-availability of any major positive news and budget concerns were the two main reasons for the lacklustre activity.
Auto sector remained depressed for the whole week, due mainly to rumours regarding reduction in import duty on CBUs. Finally, Indus Motors, HCAR and Pak Suzuki closed at their lower limit.
Cement stocks were also under pressure for the whole week due to arrival of imported cement in Karachi port, as reported by local newspapers.
An analyst from Alfalah Securities said that view regarding market for the next week may be neutral to negative and activity may remain on the lower side which normally happens before budget.
However, news regarding removal in badla cap may create a short term rally. Buy on dips strategy would be a better strategy mainly E&P and Banks.
An analyst from Investcapital felt that the market is going to remain volatile in the next few weeks leading to the budget announcement of June 5. Major drivers for the market would be the budget-related news, which could take the market in one direction or the other. In addition, the developments on the enhancement of the CFS limit and its new mechanism could also impact the market. "Our advice for readers would be to buy fundamentally strong scrips on dips and refrain from speculation in this volatile market situation."
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