The benchmark KSE-100 Index shed 212.93 points (1.8 percent) to end the first quarter of 2011 at 11,809.54 points. The market remained volatile during the quarter, fluctuating by 11.5 percent with a high of 12,681.9 on January 17, 2011 and a low of 11,223.5 on January 25, 2011.
The market started to witness downward pressure, as foreign investors decided to offload their investments during March 2011. This situation went gloomy for the Index, as OGDC, after enjoying a rise of 53 percent on year-on-year basis in CY10, suffered a major blow by losing 21 percent on quarter-on-quarter basis in the first quarter of 2011. Moreover, continuous delay in the implementation of leverage product further dampened the market spirit, analysts said.
"Though the leverage product (MTS, MFS and SLB) were finally introduced by end of the quarter, however, its stringent rules and higher interest cost restricted major increase in trading volumes", Faisal Khan, head of research at Arif Habib Limited said.
However, foreign portfolio investment provided substantial support to the market with a net inflow of $52.3 million during the quarter, even though in March 2011 FIPI witnessed an outflow of $16.2 million. Moreover, SBP's decision to maintain discount rate at 14 percent also strengthened the market sentiments, he added.
Unlike many Asian markets, which endured major capital flight, local bourses witnessed a net inflow of $52 million during this quarter. Strong performance by the western markets attracted the capital back to the developed world. Though Pakistani markets did not witness a net outflow, however, net inflow during the quarter was reduced by 63.6 percent on quarter-on-quarter basis.
Atif Zafar, at JS Global Capital said that the KSE-100 index posted a negative return in the first quarter for the first time in last 10 years, largely on the back of intensified political noise, growing tensions within the MENA region, concerns over effects of the dreadful earthquake in Japan, and announcement of new taxes amid inconclusive talks with the IMF.
However, the market showed some resilience, closing the quarter down only two percent - largely at par with the regional markets. Foreign investment, which had largely dominated the local bourse in the last few quarters, too slowed down and trailed its previous four quarters average by 60 percent at $52.5 million. Interestingly, volumes failed to gain any momentum despite the launch of the much awaited leverage product after a gap of two years and were recorded at average 123 million shares ($64 million), he added.