The war hysteria jolted a perfectly sound market at the fag-end of the last week as conflicting rumours about the Indian attack triggered panic-selling from all and sundry. There was confusion as everyone tried to sell in part, his long position before a possible crash, if war starts.

Stocks, therefore, fell across the board at the weekend session as war clouds thickened on the Indo-Pakistan horizon, despite the US diplomatic offensive to avert a possible conflict between the two close neighbours.

“The Jammu massacre could well prove a last straw on the already tensed Indo-Pakistan relations”, fears a leading member of the KSE, adding “but a series of negative political developments and terrorist attacks have aggravated the situation”.

The panic reversal of the potentially buoyant market came to a halt after the rumours of Indian attack on Pakistani positions in Sailkot sector, reached here.

Earlier, the stocks performed credibly well during the early part of the week, despite mounting tension on the Indo-Pakistan borders and fears of an imminent clash between the two armies as there were more buyers than the sellers.

The KSE 100-share index, which at one stage had fallen below the 1,800-point barrier, managed to break it, thanks to the relative strength of the leading index shares, notably the PTCL and the Hub-Power but the weekend panic-selling again pushed it to close below this level at 1,780.00, off 18 points.

The market capitalization also showed a fall of Rs5 billion at Rs411 billion from the previous Rs416 billion.

“The massacre in Jummu could well prove a possible flash point in the backdrop of Indian prime minister’s threat of retaliation”, a leading stock and business analyst fears, but hopes “the ongoing US diplomatic offensive could defuse the tension as there is no veiled threat of choosing his own fronts from Vajpayee”.

However, its fallout in the subsequent sessions will continue to have a destabilizing impact on stock trading here as the Indian prime minister “really meant what he has said in his parliament”.

“The market direction in the coming sessions may be guided by the Indo-Pakistan tension rather than the corporate and economic background news”, some brokers fear. But some others ruled out the possibility of any big shakeout at this stage as the smaller segments of investing public has already been eliminated from the game after the index had fallen by 100 points or six per cent last week.

“The market is now in the tight grip of big ones and it may not be that easy to corner it according to one’s whims”, stock analysts at the Aziz Fidahusein brokerage houses said, “the presence of strong selective support despite weak post-price hike performance of the energy sector reflects that the market has other reasons behind it to behave orderly”, he adds.

Led by institutional traders, the investors were not deterred by the war threat and covered their positions on selected counters, sending signals that the threat of war is there but it may not be imminent”, he adds.

Investors also covered their positions encouraged by higher fixation of petroleum prices followed by strong buying in the PSO and the Shell Pakistan on perceptions that higher earning may enable their managements to enhance the rate of dividend.

The falling badla volume may not be the only stimulating factor behind the snap rally, which defied bear overtures to cash in on border tensions followed by the Jammu massacre, some technical factors may also be at work, stock analyst at Kausar Abbas Bhayani, Zubair Ellahi says.

“Strong institutional support seems to have pulled a terribly shaky market out of the current impasse,” a leading stock analyst at the Moosani Securities commenting on the market run-up say, and adding, “objective conditions on Indo-Pak borders, however, don’t warrant snap rallies”.

Essentially, the support was selective and was mainly confined to the leading index shares, which caused an increase in its value after even posting fractional gains, he says.

The PTCL, the Hub-Power, the PSO, the ICI Pakistan having over 50 per cent weightage in it rose in unison, lifting the index above the chart point of 1,800 points. Rumours of rise in oil prices by the oil marketing committee was an aiding positive factor, which generated strong short-covering in the PSO and the Shell Pakistan.

“I don’t call it an inspired rally to demonstrate that the local investors are least worried over the developments across the border”, stock analyst Salman Ahmed at the Al-Mal Securities says, adding “notwithstanding the Vajpayee’s threat of retaliation in response to the Jammu killings”.

When the big ones re-enter market with buystops, others follow them without knowing reasons behind the change in the market psychology and the investors’ future perceptions.

However, as tension on borders is mounting, it appears that the near-term share outlook may remain bearish, however, with technical rallies here and there. But some leading stock brokers think the current peace moves being initiated by the US to defuse tension between the two neighbours could work allaying the fear of conflict.

Some positive corporate news, including the line of a new product by the Telecard and the PTCL and a bailout package for the FFC-Jordan Fertiliser also proved a stabilizing factor. Both shares rose smartly on strong buying.

Top gainers were led by the Rafhan Maize Products, Shell Pakistan, Siemens Pakistan, Lever Brothers and Wyeth Pakistan, which though turned back on late selling.

Other good gainers, which rose modestly included the 11th ICP, Javed Omer, Pakistan Tobacco, the PSO, the PEL Appliances, Engro Chemical and the Clover Pakistan.

Losers were led by the Nestle MilkPak, Babri Cotton, Sapphire Textiles, Dawood Hercules, Reliance Weaving, the EFU General, Beema Pakistan and the Murree Brewery, falling modestly lower.

Trading volume fell to 600 million shares from the previous 700 million shares bulk of which again went to the credit current volume leaders, notably the PTCL, the Hub-Power, the PSO and some others.

They were followed by the FFC-Jordan Fertiliser, the ICI Pakistan, Engro Chemicals, the Sui Northern, the KESC, Telecard, Ibrahim Fibre, the National Bank, Dewan Salman, Adamjee Insurance and several others.—Muhammad Aslam