KARACHI: The New Year brought glad tidings for the stock market where the KSE-100 index logged gains of 1,475 points (3.61 per cent) and closed at 42,323, following a spectacular rally extending from the closing sessions of 2019.

Investors’ appetite for risk assets diminished on Friday and they preferred to seek the shelter of safe havens, mainly gold, after news of US air strike in Baghdad that killed a key Iranian Commander, raising spectre of a major breakout of hostilities in the region and beyond.

Foreign selling continued, clocking in at $7.3 million compared to net sale of $2.9m the earlier week. Outflow was witnessed in commercial banks at $4.7m and fertiliser $1.4m. On the domestic front, major buying was reported by Mutual Funds worth $8.6m, followed by banks who built positions of $4.2m to reallocate liquidity raised by profit-booking in the last week of the previous year.

Average volume rose 23pc at 282m shares while mean value traded came in at Rs10.7bn, up 29pc.

Besides the influx of liquidity on New Year allocations by banks and other institutional participants, a constant flow of positive news helped shore up investor sentiments. Foreign exchange reserves improved by 5.5pc to $11.5 billion, bolstered partly by the release of second International Monetary Fund tranche. The inflation reading for December 2019 clocked in at 12.63pc, lower than the market consensus, which was seen as an indicator that would set the tone for eventual monetary easing.

Investors in equities also hoped for a major flow of funds after the government cut profit rates on all National Saving Schemes, following the decline in bond yields. Moreover, the eventual advent of Exchange Traded Funds likely provided additional support to key index constituents during the week.

Sector-wise, positive contributions came from commercial banks at 261 points, fertiliser 218 points, oil and gas exploration companies 208 points, power generation 184 points and cement 171 points. On the other hand, declines came from tobacco, lower by 27 points.

Going forward, many analysts and traders expect the market to remain in the green zone. Oil scrips could particularly benefit from the renewed tension in the Middle East which could fire up the international fuel prices.

Moreover, blue chips in major heavyweight sectors could receive fillip due to inflow of liquidity as foreign investors begin to make fresh portfolio allocations after they shake off the long Christmas and New Year holiday blues.

But for all that, some pundits affirmed that local participants may remain on the side of caution to build fresh positions.

Published in Dawn, January 5th, 2020