KARACHI, Oct 5: Contrary to popular belief, stock markets in Pakistan do not behave any differently during the holy month of Ramazan than other days, a study of the KSE-100 index trend of the previous seven years shows.

“As a general rule, the bears and the bulls do not recline in the heat of Ramazan,” says Mohammad Sohail, director, equity broking and research at Jahangir Siddiqui Capital Markets Limited. But he points out that past trends do reveal somewhat decrease in volumes, which nonetheless, was not on account of a drop in trading interest but due to a reduction in trading time by an hour during Ramazan.

The research section of brokerage firm InvestCap has been preparing an interesting study of trading pattern during the month of Ramazan for several years. In the report released on Sept 23, Khalid Iqbal Siddiqui, the research head at InvestCap, observed that the direction of the stock market usually remained the same in Ramazan, “but with lesser speed”.

A comparative analysis of pre- and post-Ramazan trading for seven years — from 1998 through 2004 — revealed that the benchmark KSE-100 index marched forward in the same direction during the month of Ramazan as during the month before (barring two exceptions: in 2000 and 2003). “However, the amount of change in equity prices during Ramazan is usually lower than the preceding month,” Mr Siddiqui says, pointing out that the analysis was based more on a technical perspective than fundamental.

A table appended to the report showed that in five of the seven years, the market had kept up the rising or falling momentum. The change in the KSE index in Ramazan (representing the first figure) and a month before was as follows: 2004, plus 0.3pc and plus 7.5 pc; 2002, plus 5.5pc and plus 9.6pc; 2001, equal and plus 12.2pc; 1999, plus 10.6pc and plus 14.6pc; and 1998, minus 0.7pc and minus 4.9pc. In the two years, it showed opposite trend — in 2003, the KSE-100 index was up by 2.9pc during Ramazan and minus by 5.1pc a month before. In the year 2000 also, the index rose by 13.9pc during the month of fasting while it had slipped by 11.0pc during the previous month.

InvestCap noted that an interesting phenomenon was that the market kept on heading towards the same direction in the month following the end of Ramazan (i.e. Shawwaal). “And what’s more, the amount of change in the KSE-100 index is usually higher than that of the change during Ramazan,” says Mr Siddiqui.

During the current year, the KSE-100 index had risen sharply during Shabaan -— the month before Ramazan — which was thought to bode well for a positive jump in equity prices during Ramazan as well. “However, this time around, Ramazan’s last fortnight would be coinciding with the July-Sept 2005 quarterly result announcements, mainly of the best performing stocks in banking and oil and gas sectors,” say the analysts. They thought that developments on the privatization front (either negative or positive) and interest rate movements would also play a key role in determining the direction of the equity markets this time around.