The share market during Ramazan would likely to be dull because of less participation from investors and reduction in daily timing, but any positive development on the privatization or economic front might change the course of the domestic stock market.
The holy month of Ramazan is just around the corner and its impact on the daily trading routine of the stock market and the direction of the benchmark KSE-100 Index is likely to be felt as has been the case in the past.
Khalid Iqbal Siddiqui, head of research at Investcapital Securities, said: "We have tried to use recent history as a reference point to try and forecast the sort of activity one can witness in Ramazan."
"We would just like to clarify one point: this analysis is solely based on past trends and doesn't have much to do with market or scrip-wise fundamentals. Therefore, this report is more from a technical perspective than fundamental", he added.
The benchmark KSE-100 Index usually maintains the same direction during Ramazan as during the month before Ramazan (barring 2 outliers in 2000 and 2003). However, the amount of change in equity prices during Ramazan is usually lower than the preceding month.
What is more interesting is that the direction is then maintained in the month following the end of Ramazan (ie Shawwaal). And what's more, the amount of change in the KSE-100 is usually higher than that of the change in Ramazan.
The average daily volume at KSE usually falls during Ramazan as compared to the preceding month (ie Shabaan), and then picks up once again in the month following Ramazan.
The reduction in volumes during Ramazan can be attributed to reduction in trading time. And along with reduced trading time, there is reduced interest from most speculators (who provide the majority of the volumes) as time is spent on other religious activities.
Last year, before Ramazan, the market gained 7.5 percent and the daily average volume was at 274 million shares. While in Ramzan, it was up by 0.3 percent and the business was at 176 million shares.
In Shawal, the capital market recorded an increase of 5.2 percent while deals average at 325 million shares.
In 2003, during Ramazan, the index gained 2.3 percent and in the following month 8 percent, while daily average transaction amounted to 128 million shares and 289 million shares respectively.
In Shabaan so far, the KSE-100 is up 4.3 percent, which bodes well for a positive jump in equity prices during Ramazan as well.
However, this time around, Ramazan's last fortnight would be coinciding with the July-Sept, 2005 quarterly result announcements.
Also, developments on the privatization front (either negative or positive) are likely to impact the Index's direction. Interest rate movements are also going to play a key role in determining the direction of the KSE-100 index.
Some of the analysts were of the view that before Ramazan, the government received the payment from Etisalat for the purchase of PTCL stake, higher dividend announcement from the telephone giant, and some positive development on privatization sector, like completion of process of PPL or PSO stakes and from the government selling GDRs or ADRs on some of the blue chips, might trigger a rally.