SEVERAL dramatic real-life moments were witnessed by bewildered investors at the Karachi stock market during the week ended Friday.

They included the spectacular fall of the rupee against the dollar, which dived down as low as nearly Rs112 to a dollar in intra-day trading in the interbank market on Thursday; and the unexpected decision by the SBP on Friday to link the floor on banks’ rupee savings account deposit rates to the discount rate — thus making it a floating rate.

Although the rupee stabilised at Rs105.35 on Thursday following an intervention by the central bank, the damage had been done. Friday’s decision, which would raise the minimum profit rate on saving accounts by 50bps to 6.5 per cent from six per cent from October 1, is bad news for the banking sector. It resulted in a rapid sell-off in bank stocks, resulting in an erosion of 4.4 per cent in the sector’s market capitalisation on Friday.

The investors were also alarmed over the huge equity sell-off by foreign investors during the week. On Wednesday, foreign fund managers sold $11 million worth of stocks — the highest one-day outflow in two and a half years. Foreign selling amounted to $14.2 million during the week, which was quite a turnaround from net purchases valued at $6.8 million in the prior week.

Spooked by such negative news, investors went into panic selling, making the KSE-100 index plunge by 5.1 per cent or 209 points over the week to close at 22,387 points.

Other developments on the economic front included the increase in 10-year PIB yields by another 30-35bps to reach 12.95 per cent, and the payment of $143 million loan installment to the IMF.

Samar Iqbal, an equity dealer at Topline Securities, says the telecom sector remained on investors’ radar as they are expecting better earnings after the government’s measures to curb grey trafficking.

Average daily volume dropped by 25 per cent to 183 million shares from 244 million shares in the previous week.

The volume leaders during the week were Telecard, Bank of Punjab, NBP, Nimir Industrial Chemical, Pakistan Telecom Company Limited, Maple Leaf Cement and TRG Pakistan.

Market capitalisation saw an erosion of 4.48 per cent or Rs248 billion to reach Rs5.295 trillion, from RsRs5.543 trillion in the earlier week.

The leading gainers during the week were Engro Polymer Chemical, Sui Southern Gas Company, Indus Motors, Hum Network, Javedan Corporation, Shifa International Hospitals and Grays of Cambridge.

The biggest losers were mainly the banking sector stocks, as heavy falls were noted in the stock prices of Habib Metro Bank, UBL, MCB, Bank Al-Falah and Bank Al-Habib. Other shares taking a dip included ICI and Maple Leaf Cement.

Future outlook: Analysts at AKD Securities forecast the bearish sentiment to continue in the market this week, where bank stocks are expected to continue shedding value. Moreover, investors’ concern about the rupee-dollar parity volatility is expected to further drag down the KSE-100 index.

“That said, the cement sector may step into the limelight as cement dispatch volumes picked up after a seasonal slump,” the analysts said.

Analysts at KASB Securities also believe the outlook on the equity market to be weak. The impact of the regulatory changes regarding the minimum deposit rate is believed to keep the banking sector under pressure, whilst overall macro concerns and the expectation of higher interest rates are feared to keep the performance of leveraged companies subdued.

“We reiterate a cherry-picking approach for investors and advise them to keep a close eye on the currency movement,” the analysts cautioned. A dealer at Topline Securities added that going forward, the rupee’s move and the inflation figure for the month of September would be key events for the market.—Dilawar Hussain