Equities recover

The Karachi stocks market grew by 1.38 percent, Week-on-Week (WoW), to close at 33,057 points. The "recovery of sorts" came what equity analysts said despite reports of proposed raise in the Capital Gains Tax (CGT). The week under review saw daily trading volume averaging 71 percent higher on 186 million shares. The value of stocks traded averaged on Rs 9.6 billion, up 84 percent WoW basis.
Sectors that made major gains included media 18, tobacco 11, paper and board 10, household goods 7, automobile and parts 7, general industrials 4 and cement 4 percent.
Scrips from beverages and commercial banking sectors settled in red losing five and one percent, respectively. On foreign portfolio investment front, local mutual funds were seen as major net buyers of $8.3 million. While the foreigners and local banks sold portfolios worth $6.8 million and $3.0 million, respectively.
Investors took fresh positions in the cement sector on the back of proposed higher development spending in FY16, said analysts at Topline Research.
"The market made a recovery of sorts during the week," viewed researchers at Arif Habib Limited.
Despite the improvement, they said, the investors continued to employ a wait-and-see approach in anticipation of what the budget might hold.
However, the announcement by the FBR for revenue collection target and PSDP allocation eased a part of investors'' fears leading to an upward trend in the market.
"Equities failed to gain any firm strength from the weekend''s Monetary Policy Statement," said Raheel Ashraf of JS Global. The State Bank of Pakistan announced what analysts called it a surprise 100 basis points cut bringing its eight percent discount rate to seven percent.
"Reports of increase in Capital Gains Tax rate in the upcoming federal budget and hike in gas prices from July 1 kept investors on their toes," said Raheel.
The cement stocks, he observed, outperformed others as the rate cut was expected to lower their financial costs.
The banks, however, received a battering on the policy rate-cut. He dubbed the 1.38 percent raise as marginal.
Analyst Abdul Azeem said the market remained volatile despite a large rate cut. The investors started building up their positions in the leveraged stocks as beyond expectations rate-cut triggered a buying appetite in investors.
Uncertainty on budgetary side and future roll-overs kept haunting risk-averse investors throughout the week.
Key highlights of the week were: Government approving Rs 262 billion taxation measures for the upcoming budget, FBR proposing a flat 35 percent tax rate on all sources of income of banks, ministry preparing gas tariff plan to generate Rs77 billion, government intending to apply uniform GIDC rate on old and new fertiliser plants in view of the ruling issued by Competition Commission of Pakistan, ministry saying government wants to take LNG imports to 1.3bcf by 2016-end and government rejecting OGRA''s summary to increase petroleum product prices.
The analysts expect the bourse to stay range-bound going forward. There might be some movement on the basis of speculative buying as the budget draws closer, they said.