KARACHI: Bulls ruled the roost at the stock market for all five session in the outgoing week, ending on an 11-week high return of 4.7 per cent. The KSE-100 index gained 1,601 points and settled at close of market on Friday at 35,978, reaching 124-session high (six months).

Positive investors’ sentiments were underpinned by expectations of a rate cut by the State Bank of Pakistan in its monetary policy to be announced later in the month. The continuous decline in government securities’ yields provided that confidence which was fortified by the government slashing National Savings Scheme profit rates by 170-228 basis points across all saving plans.

Although higher than expected inflation reading for Oct’19 at 11.04pc put some cold water over the positive momentum generated in the hope of a rate cut and individuals who had led the run up in stock prices joined institutional investors in profit booking. Fore­igners stepped forward in the last two days to cherry-pick blue-chip scrips which helped the index to maintain is northwardly journey.

Morgan Stanley Capital International (MSCI) on Friday released results of its November semi-annual review keeping Pakistan index with weight of around 3bps in the Emerging Market (EM) Index, which set at rest concerns of a downgrade and possibly sparking interest of foreign funds in local equity.

Moreover, SBP reserves increased to $8.4 billion which is the highest level since April. Furthermore, external account position continued to improve with the trade deficit declining 34pc during 4MFY20.

Although political events - mainly the stalled talks between the government and the opposition to come to terms on bringing an end to sit-in in Islamabad - kept investors cautious. There was no panic selling as most of the market thought the issue would be amicably resolved and the noise may die down as the ailing former prime minister was allowed to fly abroad for treatment.

During the week foreigners bought shares worth $4.5m against net outflow of $3.1m the week before. Foreign buying was witnessed in fertilisers at $6.7m and oil and gas marketing companies (OGMCs) at $3.2m.

On the domestic front, major selling was reported by banks/DFIs amounting to $6m and insurance companies $4.6m while corporates were active buyers of $4.9m and mutual funds $2.8m worth of shares. Average volume settled up by 55pc at 258m shares while mean traded value clocked in at $54m (higher by 52pc). Sector-wise, cement came in for some active buying as despatches for October were up 9pc with the sector gaining 6pc. Other positive contributions came from fertiliser at 374 points, commercial banks 357 points, exploration and production 211 points, OGMCs 115 points and automobile assembler 91 points.

Going forward, market pundits see greater volatility and perhaps some profit-taking by mutual funds and Individuals as political temperatures rise over the opposition protest in Islamabad.

However, the stabilising macroeconomy endorsed by the International Monetary Fund staff mission - which praised the authorities of over-performing on first quarter targets under the $6bn Extended Fund Facility — could help market continue its bullish stance.

Published in Dawn, November 10th, 2019