Stocks turned into a highly volatile performance during the last week as investors played on both sides of the market under the cross-current of positive and negative background news.

The mid-week saw either-way violent movements of the KSE 100-share index, but luckily financial institutions came to its rescue and most of the initial losses were wiped out both in terms of the market capital and the index.

It was, therefore, a terribly disturbing week for the stock market as the negative news followed in quick succession keeping investors and leading brokers at their toes all the time. None among them could precisely decide how to react to the changing corporate scenario.

However, the weekend resistance to further marking down of prices reflected that massive correction is now over and the market’s highly oversold position could attract a lot of fresh covering purchases. It may well lead to market’s upward movement and absorption of negative fallout of some central bank measures to restore sanity to stock trading.

Firstly, it was the Pakistan Telecommunications (PTCL) relief package for its billion of subscribers in the form of cut line rent and call rates. Then came the announcement of margin financing regulations by the State Bank for brokerage houses aiming at restoring the sanity to stock trading.

Both steps followed in quick succession and halted the market’s mid-week run-up boosted by positive economic indicators notably higher exports, foreign exchange reserves, the GDP growth, low inflation and improved farm and industrial productivity projected in the central bank’s annual report.

Leading brokerage houses say it may be pretty difficult for most of the their members to qualify for the bank margin financing. In addition to being a limited company they have to keep 30 per cent of their entire share holding as security to the margin financing banks.

“The switchover from the existing badla system to the bank margin financing is now a reality and is in the right direction to halt manipulations by a few”, an analyst said. “Those who know the ingenuity of a typical Pakistani mind believe they may create a parallel system and efficient outlet not to beat the system but to protect their business interests”.

The KSE index, therefore, not only shed the mid-week smart rise of 74 points but lost further grounds on heavy selling in the PTCL prompted by the perception of its lower EPS and annual profits. The PSO also lost a good part of its gains netted during the last couple of sessions and fell modestly and so did the Hub-Power and other high-profile shares.

“I don’t think bulls alone could halt the current technical correction until the financial institutions join hands with them to take on the bears”, fears a leading stock analyst. “They are eyeing the index level of 3,500 points for the near-term”.

The market’s nervousness may well be gauged by the massive plunge of 111.88 points at 3,755.67 in the KSE 100-share index, wiping out its overnight run-up and pushing it to new lows for last several months. The late recovery allowed it to finish with a modest fall of 18 points at 3,363.15 points.

“With a weightage of 33 per cent in the index, any bigger fall in the PTCL for some negative profit outlook may weigh heavily against the underlying sentiment as it evokes sympathetic selling in other leading base shares”, brokers said.

Due to the size and weightage, it is capable of taking the entire market along with it in the minus column followed by the reports of any negative projections about its profit, they said. “Fresh heavy liquidation in the PSO, the Hub-Power and some other pivotals accelerated the market decline”.

There was, therefore, no trace of the overnight robust rally as investors, including the institutional traders hastened to get out of the market awaiting next official moves on the PTCL.

The total impact of the recent tariff relief to general consumers on the PTCL annual profits will be to the tune of Rs5.5 billion which in turn would lower the EPS by 60 to 70 paisa from the previous year’s Rs4.53 per share.

“The PTCL’s recent tariff rebalancing exercise finally looks to be complete”, says a leading analyst commenting on its relief package for the year to its consumers. “The ruling elite may have some political and social motives behind these reliefs to win the public mandate”, he adds.

Analysts at a leading brokerage house has revised the PTCL annual profit from the previous projections after incorporating the current tariff reliefs and put a safe figure of Rs23 to 24 billion as compared to the previous estimate of over Rs30 billion.

Reports from the Privatization Commission were encouraging as apart from the Expression of Interest submitted by five companies to buy the controlling shares of the KESC, much headway has been made on the sell-off of the Habib Bank and partial liquidation of the National Bank shares.

The biggest fall was reported in the PSO followed by the PTCL, the Hub-Power and some other current favourites, notably energy and auto shares. The UniLever Pakistan followed it. Other leading losers were led by the BoC Pakistan, Pak-Suzuki Motors, Indus Motors, Al-Ghazi Tractors, Shell Pakistan, Javed Omer Lakson Tobacco, Island Textiles and the Pakistan Oilfields.

Gainers were led by the Gillette Pakistan, Ghani Glass, Glaxo-SKF, the National Refinery, General Tyre, Ahmed Hassan Textiles, Trust Leasing, Orix and Natover Leasing and some others.

FORWARD COUNTER: The PSO again came in for renewed selling and led the list of other pivotals. Doubts prevailing about its sell-off was one chief reason. The PTCL and the Hub-Power also fell but modestly and so did the Engro Chemical, the MCB and Fauji Fertiliser amid either-way movements.