Stocks rally on rate cut

24 May, 2016

Opening southward, the equities rallied Monday to hit all-time high of 36,723 points, up 30 points from 36,693 points of last session. The bullish close, analysts said, was led primarily by leveraged stocks with Saturday's 25 basis points policy rate-cut reflecting adversely on the banking issues. The central bank "surprisingly" slashed its discount rate for next couple of months from 6.0 to 5.75 percent.
The hardest hit banking stocks were MCB Bank, HBL and UBL which, respectively, shed 5, 2.8 and 2.6 percent in the week's first trading session.
In the intraday trade, the benchmark KSE-100 index showed volatility by moving both ways to hit the session high and low of 36,753 and 36,432 points.
"Stocks touched fresh highs led by cement, fertilisers and oil scrips after surprise SBP policy rate cut by 25bps to 5.75 percent on Saturday," viewed Ahsan Mehanti at Arif Habib Corp.
The analyst said leverage stocks led the pre-budget rally amid speculations on likely new taxes on corporate sector.
"Sentiments remained upbeat on developments in CPEC projects and expected MSCI upgrades next month that played a catalyst role in positive close," he added.
Trading turnover slid to 265 million shares, the value of which depreciated to Rs 10.7 billion from the previous Rs 11.5 billion. Of the total 366 scrips traded, 183 posted gains, 162 lost their worth and that of 21 stayed unchanged.
The market capital contracted to Rs 7.47 trillion as foreign portfolio investment marked a net selling of $4.46 million.
K-Electric, rising to Rs 7.93 at close, led volumes with 50 million shares. Others to follow were SNGPL, JSCL, PIBT, Byco Petroleum, Dewan Cement, Pak Refinery, Telecard Limited, Dewan Motors and TRG Pakistan.
Trade on the futures market swelled beyond 86 million contracts compared to 42 million of Friday last.
"Market opened on a negative note as the index fell to make an intraday low of 36,433 points but heavy buying was witnessed during late hours," said Arhum Ghous of JS Research.
She said bears dominated the banking sector because of SBP's rate-cut. While PPL, up 0.28 percent, kept its upward trajectory, correction was seen in scrips expected to be part of MSCI Emerging Market index. HUBC gained 2.90, ENGRO 1.83 and FFC 1.48 percent.
"Moving forward, we remain bullish on the market," the analyst said.

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