BULLISH conditions prevailed on the Karachi stock market during last week. Investors were not inclined to take even a technical breather, and followed the lead given by the foreign fund managers. None among them was inclined to miss the bandwagon.

An attractive bait of capital gains remained the dominating force behind the massive selective buying. Most of the leading investors became multi-millionaire after taking stake in hot cakes, notably on the forward counter. The traded volume in one session set the two-year peak level at 505 million shares. The previous best figures being 536 million and 560 million shares.

The current buying euphoria, aided by a judicious blend of both local and foreign buying, is expected to push the KSE 100-share index above the all-time record of 2,662 points, established a decade ago as most of the blue chips still ensure handsome capital gains under the lead of the PTCL and the Hub-Power.

Already, it has touched the high mark of 2,572 points and if all goes well with the bull perception, the current year will witness new records, both in terms of individual and collective performance of the broader market. It finally ended with a gain of 73 points or five per cent at 2,525 points.

The economy may not be that strong to sustain the current price flare-up, the lure of privatization, the advent of selective foreign buying, and the perception of handsome capital gains did not allow the investors to keep to the sidelines.

But the chief villain of the game appears to be the cut in interest rates by two per cent by the central bank on the Pakistan Investment Bonds, and a massive outflow of funds from the fixed income groups to share business, analysts said.

“For the time being, the theory of relativity seems to have lost its relevance as far as the return on fixed instruments or the capital gains in share business is concerned”, some analysts said, “everyone is out to ride a bandwagon but not for many good reasons”.

No one could dispute the fact that the market is now in a highly overbought position and in the backdrop of typical Pakistani market conditions, it is fraught with high risks at least for the near-term.

However, the KSE 100-share index confidently crossed the barrier of 2,500 points but consolidated well above it, as the bulls were not inclined to take even a technical breather and indulged in fresh speculative buying, outwitting the bears after having made deeper inroads in their domain.

In mid-week session, it hit the nine-year peak level at 2,572 points, an increase of about 100 points over the last week’s close. The important thing was that this crucial level was not only sustained but was consolidated well above it.

“It finally crossed the Rubicon straight without having made an abortive bid earlier as in the case of 2,400-point index level”, one broker said, “what is next, appears pretty difficult to predict at this stage”.

But the prevailing selective buying euphoria in the Hub-Power and the PTCL reflects that the best level still has to come before the year is out.

Bullishness was more pronounced on the forward counter where both the PTCL and the Hub-Power came in for strong speculative support and rose sharply on large turnover.

Some brokers claim it was the strength of the cleared list which spilled over to ready section, creating boom-like conditions. Hedging facilities on the forward counter being the chief rescuing operative for those who will need a bail-out package at any stage of the current run-up or the market retreat, they added.

Over the last one year, it had risen by more than 100 per cent from 1,200 to 2,500 points, adding Rs150 billion to the market capitalization, but it has still to match its spectacular performance of the mid-90s boom conditions.

“The market capitalization soared to Rs610 billion after the index hit an all-time high of 2,662 points in March 1995”, says a leading analyst commenting on the recent performance of the market, “but the current figure at Rs564 billion reflects that the broader market failed to benefit from the selective rise”.

Incidentally, at that time some of the leading mega and massively capitalized issues including the PTCL were not listed on the KSE and the hefty rise in the market capitalization did reflect the general price flare-up ensuring a fair return on investment to all the participants.

“Buy as you like in the safe havens such as the Hub-Power and the PTCL, which together hold a weightage of about 44 per cent in the 100-share index and push it to any high ignoring the broader market”, one broker jokingly said adding, “but I don’t term it a speculative rise though there are not many cogent reasons to sustain this level at least for the near-term”.

Selective foreign fund buying is there aided by local financial support, but most of the genuine investors are not inclined to ride the bandwagon until they are sure that they would not be caught in the whirlpool after the retreat of the speculative forces.

The market witnessed a fair amount of profit-selling at higher levels as was reflected by the massive volume figure, although each dip attracted a lot of covering purchases as the lure of attractive capital gains did not allow investors to sit on the sidelines.

Despite active profit-selling at higher levels, most blue chips finished sharply higher under the lead of the Pakistan Refinery, the PSO, the Crescent Steel, the Clariant Pakistan, the Adamjee Insurance, the Wyeth Pakistan, the Unilever Pakistan, the Engro Chemical, the Dawood Hercules, the Transpak Corporation, the Tri-Pack Films, the Universal Leather, the Grays of Cambridge and the Rafhan Maize and the second-liners such as the Souvenir Tobacco and the Shahtaj Sugar.

Losers were led by the Central Insurance, the Millat Tractors, the Dawood Hercules, the Kohinoor Weaving, the IGI Insurance, the Sarhad Cigarette, the Wyeth Pakistan, the Island Textiles and many others.

Trading volume soared to an all-time record figure of 1.892 million shares, about 70 per cent of which went to the credit of the Hub-Power and the PTCL followed by the Sui Northern Gas, the PSO, the Engro Chemical, the Fauji Fertiliser, the ICI Pakistan, the National Bank, the FFC-Jordan Fertiliser, the Nishat Mills, the Adamjee Insurance, the Japan Power, and many others.

FORWARD COUNTER: A price flare-up was also witnessed on the forward counter, where the PSO, the ICI Pakistan and the Engro Chemical were traded sharply higher on the strong speculative support.