Stocks rally as inflation data sparks optimism

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KARACHI: Stocks closed sharply higher on Friday, buoyed by positive data indicating a year-on-year Consumer Price Index (CPI) inflation rate of 11.1 per cent for July, which is likely to prompt further reductions in the State Bank’s policy rate.

The market maintained a largely positive trajectory throughout the last trading session of the week, closing at 78,226 points, marking an increase of 0.62pc or 486 points.

The sectors that contributed positively included power, exploration and production, banks, technology, oil marketing companies, fertiliser, chemical, and pharma.

However, the cement and auto sectors closed in the red. The cement sector was particularly battered after the Punjab government revised the royalty rates on cement and clinker to 6pc per tonne, Ahsan Mehanti of Arif Habib Corporation said.

The rupee’s recovery, driven by a surge in foreign exchange reserves, played a catalyst role in the bullish market close.

The finance minister’s affirmation of the IMF executive board approval of a $7 billion loan programme by the end of the month and a 12pc year-on-year increase in exports for July also bolstered market confidence.

Major positive contributions to the index came from HUBC, HBL, UBL, OGDC, and NATF, which collectively added 253 points.

Conversely, BAHL, PSEL, MTL, FFC, and DAWH experienced declines, collectively dragging the index down by 151 points.

The day’s trading volume stood at 440 million shares, with a total trading value of Rs20.38bn. CNERGY emerged as the volume leader with 66.6m shares traded.

On a week-over-week basis, the KSE-100 Index closed slightly higher, with a 0.25pc gain.

According to the brokerage firm Topline Securities, major events of the past week included the SBP’s announcement of a cut in the policy rate by 100 basis points to 19.5pc, Fitch Ratings’ upgrade of Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC+’ from ‘CCC’, and a decline in CPI inflation for July 2024. Additionally, the country’s trade deficit narrowed to $1.94bn in July, a 19pc month-on-month decrease.

The average daily traded volume and value for the week were 310m shares and Rs14.9bn, respectively.

Published in Dawn, August 3rd, 2024

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