Stocks recovered from early lows at the end of the week. Investors made active purchases at moderate levels aided by technical factors, and by Congress leader's positive statement on the Indo-Pakistan peace talks.

The market's initial reaction to the Congress victory was positive as the leading institutional traders activated market advance by committing extensively in cement and some others.

Moreover, behaviour of the new ruling elite will be judged during the next couple of weeks depending on their fresh peace moves. Some fear backlash in future political developments after the initial euphoria was over.

Earlier, the long-awaited technical correction manifested itself in a bigger way by giving credence to general belief that the current run-up was based on speculative support rather on some positive basic fundamentals.

This was one view. The other was low bank credits, high corporate payouts, and the IPOs of about a dozen new companies, including the OGDC and the Sui Southern. Some other upcoming did not allow cash heavy investors to sit on the sidelines. Hence, market rose rapidly both in terms of index and capital.

The KSE 100-share index managed to limit the fall at the fag-end of the week after breaking through two crucial barriers of 5,500 and 5,400 points and finally ending with a decline of 126 points or 2.5 per cent at 5,454.69.

An idea of investor-optimism during the pre-Vajapayee defeat sessions may be taken from the following fact. Provisional trading in shares of the Bank Al-Falah started at around Rs60 which steadily soared to Rs72 amid an avalanche of buying offers from all and sundry. It's 10-rupee share is being offered at Rs30, including a premium of Rs20. It will open for public subscription for two days on May 17 and 18. This will be followed by the PIAC, the Pakistan Petroleum and the Kot Ado Power Plant by next month. "Now, the talks of index level at 6,000 points appear a remote possibility, predicted a leading stock analyst adding, "the political change in India could have its negative fallout on the local bourses in coming weeks".

Some others, however, said the market was expected to resume its upward drive after a negative fallout of the ruling Indian elite's defeat was fully digested and the external policies of the new government known.

"The chief worry of investors was whether or not peace moves initiated by the Vajapayee government would continue", they said. "The next few weeks will tell what shape the relations between these two neighbours take".

Last week's trading pattern was highly volatile as investors, both general and institutional, were in two minds and could not decide how to react to negative news which gripped the market in quick succession.

Some analysts fear the current political divide in Pakistan's ruling elite on some party issues could lead to a big shakeout if the gulf widens further. "I presume that the time for decisive political decisions had come after Shahbaz Sharif's arrival and departure which had raised a lot of dust on the political front", feared an analyst adding, "the ruling elite may be divided on some internal issues which could lead to some significant political changes in coming weeks".

Early week negative election signals from across the border about the victory of the ruling Indian coalition was also considered a bearish factor amid fears that the current peace moves may falter halfway, experts added.

Investors, notably weakholders and day traders, therefore, decided to keep away until some positive corporate developments re-emerge in the form of higher working results or interim payouts.

Fears about law and order situation in the backdrop of last Friday's bomb blast in a local mosque and killing of over a dozen persons also worried investors who played safe until some positive developments re-emerged.

However, all was not bad with the broader market as a section of leading investors remained active buyers at the dips on almost all counters, while bargain-hunters adhered to sidelines as was reflected by a sharp fall in the traded volume.

Cement sector led the market decline as investors took profits of leading shares at the highly inflated levels and so did some of the energy and auto shares. What seems to have weighed heavily against the sentiment was active selling in the OGDC and some other base shares which pushed the index sharply lower, creating panic among some shaky investors.

Minus signs dominated the list, major losers being the Jahangir Siddiqui Bank, Javed Omer, the EFU General, Island Textiles, National Refinery, Noon Pakistan, Nestle MilkPak, Rafhan Maize, Island Textiles, Atlas Battery and the Abbott Lab.

Some major shares on the other hand maintained their upward drive and posted gains under the lead of Siemens Pakistan, Javed Omer, Aventis, Security Papers, Pakistan Oilfields, Grays of Cambridge, Packages, Sitara Chemicals, Dawood Hercules followed by Atlas Honda, Glaxo-SKF and many others.

FORWARD COUNTER: Speculative issues though managed to finish above earlier lows but generally ended further lower barring the PSO, which recovered. Rest, including, the Bank Al-Falah, the PTCL, the Hub-Power and some others were also marked down. The Abamco Capital Fund made its provisional debut at Rs10.20 but fell below its face value at Rs9.60 on large volume.