Despite increase in interest rate by SBP and uncertainty on political front during the week ended on October 2, 2010, the KSE-100 index rose by 132.99 points, closing at 10,042.44 points, mainly due to foreign investors' support, who remained net buyers of shares worth $4.7 million.
Trading also improved and the average daily volume at ready counter increased to 70.90 million shares, or by 21 percent, against previous week's 58.47 million shares.
Market capitalisation increased by Rs 38 billion to Rs 2.779 trillion. On Monday, the market opened under pressure. However, the index managed to close in positive, at 9,936.79 points, up 27.34 points, with the volume of 69.077 million shares.
On Tuesday, the index gained 44.28 points and closed at 9,981.07 points, with trading of 86.738 million shares. On Wednesday, the index gained 41.18 points and closed at 10,022.25 points with 46.071 million shares. On Thursday, the index lost 8.94 points and closed at 10,013.31 points with 88.830 million shares.
On Friday, the index gained 29.13 points and closed the week at 10,042.44 points with 63.824 million shares. Angela Memon, analyst at JS Global Capital, said that the investors chose to play safe at the week's start, in apprehension over the outcome of the NRO cases and the monetary policy statement. However, the Supreme Court's eventual decision to adjourn NRO implementation hearing to October 13 provided the market a breather, albeit temporarily. The market also did not react negatively to the 50bps hike in the discount rate to 13.5 percent, as the index remained relatively flat, with a slight pickup in activity. Pre-result rallies in SSGC, POL, APL and NRL somewhat supported the market activity.
On the economic front, the rupee depreciated beyond the Rs 86 level versus US dollar - a historic first, despite forex reserves standing at an all time high of $16.8 billion. NSS profit rates were revised upward in the vicinity of 25-48bps and the SBP also tightened rates for Export Re-finance and Long Term Finance facilities on Thursday. However, the market did not appear to react negatively to these developments on the last trading day of the week.
Saeed Khalid at Invest Capital and Securities said that from the onset of the week, the escalating uncertainty on the political front exerted pressure on the market and 50bps raise in the discount rate, a deviation from market consensus, further aggravated negativity. Hearing adjournment of the controversial NRO till 13 October 2010 by the apex court of the country prolonged the stint of fresh uncertainty on the political front, which continued to dent the fragile investors' confidence.
Consequently, market participants continued to remain away from the market as they are already on the sideline on account of uncertainty economic picture in lieu of the devastating floods and the absence of the leverage product in the market.