KARACHI: After the ruthless mid-week bloodbath at the stock market that had sent the index in deep red, the bulls drove out bears to stage a partial recovery in the last session on renewed buying interest at an attractive valuation, but the market remained in the negative zone in the outgoing week.

The three-day steep correction post-State Bank of Pakistan’s (SBP) policy rate cut kept the benchmark KSE 100 under pressure, snapping an eight-week record-setting spree.

Arif Habib Ltd (AHL) said the week commenced positively ahead of the much-anticipated softening of monetary policy with the SBP announcing a 200bps rate cut, the fifth straight reduction, bringing down the policy rate to 13pc from an unprecedented level of 22pc in June.

However, the cut disappointed trade and industry players who were expecting a more significant cut of up to 500-700bps to bring the benchmark interest to single digits as inflation hit a 78-month low at 4.9pc in November, insisting it was necessary to reduce the cost of borrowing to revive the economic activities.

In Tuesday’s session, the market came under selling pressure and lost 1,308 points as investors opted to book profits.

The country reported its highest current account surplus in a decade, amounting to $729m in November, a notable turnaround from the $148m deficit recorded in the same month last year. However, the market experienced a significant downturn, with two consecutive historic single-day point-wise declines of approximately 3,800 points on Wednesday and 4,800 points on Thursday, primarily driven by institutional investors’ mutual fund redemptions and year-end profit-taking.

Some market players cited the rising political noise, US sanctions on four Pakistani companies about the country’s missile programme, and the upcoming inauguration of the Trump administration fuelled nervous selling by some investors.

Meanwhile, PIB cut-off yields across various tenors decreased by 4-55bps. On a positive note, SBP reserves increased by $31m, reaching $12.1bn. The rupee devalued 0.08pc at Rs278.42 against the dollar.

As a result, the benchmark KSE 100 index settled at 109,513 points after a massive loss of 4,789 points or 4.19pc week-on-week.

Sector-wise, negative contributions came from oil and gas exploration (1,305 points), fertiliser (1,119 points), cement (798 points), commercial banks (446 points) and technology and communication (252 points). Meanwhile, the sectors that contributed positively were OMCs (113 points), cable and electrical goods (72 points), and power (57 points). Scrip-wise negative contributors were Mari Petroleum (966 points), Lucky Cement (430 points), Fauji Fertiliser (324 points), Pakistan Petroleum (585 points), and Engro Corporation (309 points). Meanwhile, scrip-wise positive contributions came from PSO (229 points), Hub Power (166 points), Indus Motor (90 points), Attock Refinery (85 points), and Bank Alfalah (77 points).

Foreigner selling continued during the week, which clocked in at $11.6m compared to a net sell of $0.9m last week. Major selling was witnessed in E&P’s ($5.5m) followed by banks ($4.3m). On the local front, buying was reported by individuals ($25.8m) and banks/DFI’s ($10.5m). The average trading volume dipped 19.1pc to 1.192bn shares. However, the average traded value was up 10.2pc to $218m week-on-week.

According to the AHL, the market recovery will likely continue in the coming week following the recent decline, as many stocks are trading at attractive valuations, which may entice investors.

Published in Dawn, December 22nd, 2024