The stock market during last week recorded a decline of 126 points because of rumours of lower earning expectations from PTCL, bomb blast in Islamabad and Askari Bank skipping bonus shares. During the week, the benchmark KSE-100 Index declined by 126 points, or 2.3 percent, closing at 5332 at end of the week. The main factors were rumours of lower earnings by PTCL, absence of bonus from Askari Bank results, and the blast in an Islamabad hotel on October 28.
With a mild correction in the equity markets, it is logical to expect badla markets to come down as weak holders squared off their leveraged positions. In fact, during most of the week badla rates and investment remained lower than previous week. However, on last day of the week badla investment saw significant increase. This was due to switching by weak holders from Futures to badla market.
However, since overnight money market rates remained low, badla rates remained on the lower side, too.
Monday was the only trading day where the index was able to close in the positive territory, up 10 points, to close at 5468. The market volume doubled to 226 million as compared to previous Friday. Major buying was seen in OGDC and the banking sector.
On Tuesday, the market came under the grip of the bears. Major selling pressure was seen across the board. However, buying was seen in Fauji Fertiliser Bin Qasim as it posted better earnings and announced a dividend for the first time in its history. The market closed down by 77 points, at 5390.
The bearish spell continued on Wednesday, when the market closed 7 points below its previous level. Selling pressure was seen in most sectors. However, the fertiliser sector managed to attract interest with major buying in FFC and Engro.
The market remained lacklustre on Thursday and closed at 5368, 16 points below its previous level. Major selling pressure was seen in oil stocks on the back of a decline in international oil prices. Total traded volume also plunged to the 100 million mark as the market failed to gather any interest.
The bearish spell continued on the closing day of the week when the market finished 35 points below its previous level, closing at 5332. Major selling pressure was witnessed in oil stocks, as oil prices further declined to US $50.92/barrel. The total volume remained as low as 105mn shares.
According to an analyst from KASB Equities, the results season was over, but it largely failed to drive the market upward. However, core stocks including OGDC, Fauji, Pakistan Oilfields, PTCL are likely to support the index during the current week.
"We are not expecting any news flow or results during the period which would fundamentally drive the market. The market is likely to remain volatile with dry volumes during the last half of the month of Ramazan. We expect the market to stay range-bound with the trading range of 5250-5450."
According to an analyst from AKD Securities, overall, the earning announcements for the quarter have been impressive, with exceptions coming only from PTCL and Pakistan Oilfields.
However, the excitement about earning season is fast moving into the rear view, and the market seems to be entering a dull phase. The only news flow in the pipeline in the near term is US election, where a victory of the incumbent President Bush is being considered as positive, as also vice versa. "Hence, this week we take a look at the potential risk to economic growth of the country. The view below is not an argument to be bearish on the market or economy; rather, we are just raising the flag and recommending that investors keep a close vigil on these fundamental factors."