KARACHI: The stock market got off to a flying start in the outgoing week, but with weekend profit-taking the KSE-100 index finally closed with gains of 288 points (0.93 per cent) at 34,190.

Early in the week, the investors rejoiced the expected approval of the $6 billion Extended Fund Facility (EFF) for Pakistan by the IMF Executive board; the approval of the Finance Bill 2019 in the parliament and the three-day extension in tax amnesty scheme.

Moreover, the CPI for June clocked in at 8.9pc, well below street consensus of 9.5pc, taking full year average to 7.3pc in FY19. Lower than expected inflation, positive news flow suggesting easing external account pressures and conclusion of year-end payments provided support to the rupee, which recorded an appreciation of 0.8pc against the dollar.

All of that contributed 995 points to the KSE benchmark index in the first three sessions of the outgoing week. But with the end to excitement over the IMF bailout, coupled with increase in temperature on the political front and strike from cement dealers, automobile dealers and closure of textile units on budgetary measures, investors sentiments were dampened and they were loath to carry heavy positions over the weekend. Possible monetary tightening as a result of rising inflationary levels also went to spoil investor sentiments who decided on profit-taking later in the week.

Foreign investors were net buyers during the week who cherry-picked stocks worth $5.8m against net selling of $7.9m the preceding week. The liquidity inflow in the outgoing week was mainly concentrated in power generation and distribution ($3.7m) and commercial banks ($1.7m). On local front individuals were net buyers of shares valued at $1.4m while insurance and banks reduced their exposure in equity market with a cumulative outflow of $6.9m.

Going forward, experts expect the market to remain positive as major uncertainty of IMF package approval had been clarified and the rupee had gained slight ground. However, key risks to the index included economic concerns on account of high current account deficit, slowdown in large-scale manufacturing and further monetary tightening expected in upcoming monetary policy on the back of tariff hike of utilities (gas and electricity).

But the trading volume could pick up pace, supported by commencement of result season. The major risk emanates from upheaval in political activity together with the investors nervousness over the recently approved Search and Seize rules for the SECP. Investors would also follow the fate of the protests by various trade and business organisations over the budgetary measures and the market chatter over the expectations in the month-end SBP Monetary Policy Statement.

Published in Dawn, July 7th, 2019