The stock market during the week closed on a positive note where trading and investment stocks consolidated their positions, especially in fuel, gas, energy, banking and cement sectors, with index closing on a historic high level.
The stock market is currently at historic high levels and the Index has definitely entered consolidation phase and is trying to determine its future direction.
With stock market searching for direction, badla investment rose, though gradually, while badla rates entered double digits. But there was no uncomfortable feeling as yet at the badla counter, owing to availability of ample liquidity.
The index received an upward push and closed with 55 points gain, or 1.07 percent, at 5,173.52 on Friday, as opposed to 5,118.52 last week.
The bulk of this increase was recorded in last two days of the week on the back of favourable news in the cement sector.
Reports of capacity expansion by D.G. Khan Cement helped in taking the sector, and the index, higher on Thursday, while a statement by President Musharraf that either Bhasha or Kalabagh dam would be constructed within a year added further interest among the investors on Friday.
The decrease in military activity in Wana boded well for investors. Given that the brunt of the operation seemed to be over, the threat to the market from this front appeared to have reduced for now.
Furthermore, the prophecy that the index would experience a significant correction after testing 5000 points has not proven true yet. On the contrary, the index seems to have formed a strong base around the 5000-point mark.
This is further aided by the fact that liquidity remains strong, thus reducing the chances of an overly aggressive slump in the market.
During the week, in a meeting, the KSE board took a few important decisions related to the badla market.
Firstly, COT (badla) financiers and borrowers will now not be required to make contributions to the Clearing House Protection and Investors Protection Funds.
Traders believed that this might cause some discomfort to financiers, while borrowers will benefit.
The other decision which KSE board took was that 30 COT eligible scrips will be revised every six months, out of which top 15 will qualify for trading under Futures contract.
There has been enough liquidity in the market and index on small dip started receiving fresh buying orders. A few are even eyeing 6000 as a target, which is not too far away.
Traders believe that it's all about excess liquidity lying out there to come into the market.
Mutual Funds worth more than Rs 10 billion are in the various stages of government approvals and are waiting to enter the market.
At the same time the latest market buzz is potential foreign investment as many believe that a rising market, and hence rising market capitalisation, would attract foreign funds.
India has seen some heavy influx of foreign money last year, which is still continuing and historically whenever there is interest in the Indian market there is a spill-over effect in Pakistan as well.
Analysts were of the opinion that reduced geo-political risk of Pakistan would prompt foreign fund managers to start putting money in KSE as well.
The traditional heavyweights like Pakistan Oilfields, PSO, PTC and Hubco are totally out of fashion and their lower volumes indicate the lack of interest in them. PTC does get good volumes, occasionally, but those occasions are now becoming very rare.
The index will now become very volatile owing to the inclusion of OGDC into the index. A one-rupee movement in OGDC would move the index by approximately 20 points.
Another positive development that took place on the COT front was that the previous rule of 52-weeks' average price has been abandoned.
This will reduce the cash requirement substantially for stocks like PTC, PSO, Lucky Cement, Maple Cement, and DG Khan Cement. These changes will be effective from April 12.
Lower volumes during trading hours and huge overhang of badla (COT) positions are a clear indication that if this market turns south then this stock should take the heaviest beating as all the weak holders would want to get out of the stock at the same time.
The mega growth story of cement stocks continued during the week. The news of capacity utilisation of cement companies hitting 100 percent and export prices touching $35 a ton sparked the rally. All cement stocks went crazily up on extraordinary volumes to hit new highs.