KARACHI, June 1: Dust seems to be settling down on the ‘badla’ (carryover-COT) market as the annualized weighted average rate stabilized at 16-23 per cent at the week ended Friday, May 31.

Research head at InvestCap, Mohammed Sohail observed that the uncertainty and problems that had arisen by the lack of funds in the Karachi Stock Exchange’s COT market during the previous week, were slowly returning to normalcy. Although the rates in the badla market were still on the higher side, all carry-over operations were taking place smoothly, and the chaos of the previous week was all but over.

In the earlier week ended March 24, the KSE management had been forced to take measures such as forced rollover to maintain liquidity in the badla market.

Badla investment at the KSE ranged between Rs2.3 to Rs2.9 billion and finally settled at Rs2.55 billion on Friday, i.e the last trading session. “When one compares it with the average badla investment of this year, the latest figure is almost half of the five-month average of Rs5 billion, thus signifying reduction in the weak holding position of the investors amid fears of war with India,” said Sohail.

But despite the problematic badla market having settled to a sensible trend, investors and speculators are expected to remain cautious in the coming few sessions due to uncertain border situation.

The COT Market report prepared by Saad Hashemy, research head at brokerage, IP Securities, stated that the volumes had gradually improved during the week May 27-31 to 84.8 million shares, as against only 41.2 million shares at the end of earlier week. Total amount of COT being carried over came to around Rs2 billion at the end of the current week as against Rs880 million the previous week. The average COT rate on Friday also stood reduced to 16 per cent, as against 24 per cent at the end of last week.

Analyst said that the significant point to note about the badla market was that in contrast to the earlier week, when almost all COT stocks were at the upward cap of 24 per cent, PTCL and PSO during the entire week under review, were carried over below the cap of 24 per cent. Hubco was also carried over below the upward cap of 24 per cent during all of the week, except Monday.

The COT investment in PTCL was up by a huge 144 per cent over the earlier week to Rs341 million on Friday, which represented the highest increase in COT investment in any scrip during the week. It was followed by PSO, in which badla investment rose 129 per cent to Rs526 million and Hubco, where the COT investment increased by 114 per cent to Rs706 million on Friday.

Saad Hashemy stated that from Monday all funds in the COT market would be released. Volume and investment in the COT market would then return to their usual levels. However, the upward cap on the rate would remain in force. “The levels of COT rates will depend on market sentiments, which will, in turn, be a factor of developments on the political front.” analyst observed.