Confusion grips the market

After a surge during the first week of the new year, the benchmark KSE-100 index only went up 0.35 percent during the second week as investors bought and sold on lack of clarity in various scrips and sectors.

Portfolio investments continued along the same trend with foreign outflows of 46.5 million dollars. Mutual funds as usual were there on the other side to absorb the selling with an inflow of 20.5 million dollars, while the individual investors also supported mutual funds with net buying of 17.8 million dollars. Local banks, surprisingly, were net sellers with an outflow of 26.9 million dollars.

The week was driven by news flow from the government. Firstly, the much-awaited textile export package was finally announced. It was a classic case of buy the rumour and sell the news as textile scrips that were expected to benefit from the package sold off sharply after announcement. Gul Ahmed Textile (PSX: GATM) went down 12 percent following the package in two days while Nishat Mills (PSX: NML), Nishat Chunian (PSX: NML) and Gadoon Textile (PSX: GADT) also saw heavy selling.

According to NCCPL data, individuals and brokers bought heavily, while institutions sold their textile holdings. The institutions think that it will take time for the package to kick in and they would be able to get buy these stocks at better rates.

The real see-saw this week came in the fertilizer sector. On Tuesday evening, the government notified that subsidy on all fertilizers has finished. Wednesday morning saw the whole fertilizer sector came under severe selling pressure especially Engro Fertilizer (PSX: EFERT). Foreign institutions were not impressed by this decision and sold 14.2 million dollars worth of fertilizer stocks during the week.

However, foreign investors had no idea that such decisions are always fickle in Pakistan. First the Punjab government and then the federal government, both announced new subsidy for the sector. Individuals and brokers who absorbed this foreign selling had the last laugh of the week.

The week closed off on a negative note as Friday profit taking and fears of mutual funds selling based on SECP notice of 5 percent cash requirement took over the market.

Technically speaking the immediate support and resistance levels for the index are 48,800 and 50,300 respectively. It looks like consolidation is on the cards.