KARACHI: Bears prevailed at the stock market in the outgoing week with the benchmark KSE-100 index dragged down by 1,378 points (3.3 per cent) and settling at 39,888 points after breaking two barriers of 41,000 and 40,000 points.

Investors were spooked by the arrival of second wave of Covid-19 that was feared to lead to more lock downs that would cast a blow on the economy and the markets. With the spectre of the disaster caused by the first wave fresh in memory, investors decided to ere on the side of caution and disposed of shares in the shortened four-session week (Friday being a holiday).

The market started out on a positive note as the market extended its celebrations of having averted the Financial Action Task Force black list. The rupee provided support to the market while corporates unveiled some scintillating financial results.

All of that however proved short-lived as the sell-off in the global equities and commodities market spilled over into the PSX.

Foreigners were the first to dump stocks as fund managers sought shelter of fixed return securities. The deteriorating law and order situation; the heated political atmosphere and the higher inflation, all made perfect recipe for disaster. The catastrophe turned into calamity after the government released stunningly higher figures of new Covid-19 cases with warnings of the second wave of the pandemic about to hit the country.

That sent the PSX in tailspin with blood splashed on most sectors where numerous stocks hit their lower locks.

Foreign funds were major sellers in the outgoing week, representing outflow of $21.34 million worth equity. Among local participants, individuals were net buyers of $6.40m, followed by insurance companies racking up $7.755m and mutual funds $4.71m.

For the upcoming week, market pundits were unwilling to hazard a guess as the stocks were feared to fall victim to several negatives. Investors are likely keep an eye on the Covid-19 cases as a breakout of second wave could have a dreadful impact on the economy and company profits due to inevitable lock downs and restrictive economic activities.

No one would want to hold on to shares and suffer heavy losses as happened in March during the first wave. Other than that, the increasing bitterness on the political front has put the market in deep uncertainty which perhaps is the reason for the foreigners’ exit in the outgoing week. Inflation has to be contained. The light at the end of the tunnel is the considerable appreciation in the value of the rupee.

Investors would also watch out for the remaining corporate results and any pleasant surprise on earnings and pay outs could help lift sentiments.

Published in Dawn, November 1st, 2020