KARACHI, Dec 31: The year 2002 will go into the history of the Karachi Stock Exchange as a boom year reminiscent of boom conditions of the mid-90s, and analysts predict the new year account could be more productive for the investors ensuring a fair return on their investment.

“The 2 per cent cut in the discount rate by the central bank appears to be the chief villain of the game and the father of the prevailing boom conditions,” they said. “The money will go where it is safe and could appreciate.”

An old adage now seems to be working in reverse gear.”Too many rupees are now following too many stocks in a highly overbought market,” one broker said adding “previously too many a rupee follow too few a stock causing unprecedented price flare-up.”

Both the financial institutions and bankers have realized after the rate cut, the bait of capital gains, is now more attractive than any other mode of investment and return on it. They flooded the share market with “buystops”, sending signals among the retailers and the genuine investors to follow them followed by the current boom.

Perceptions of a political stability, signs of the economic recovery and predictions about the possible riding of the bandwagon by some leading foreign funds were said to be contributory factors supporting the current boom.

“Considered as a barometer of the national economy whether or not the current boom conditions on bourses will be fully reflected in the economic recovery will be seen with interest by the financial analysts,” brokers said.

Higher dividend announcements even by the ailing textile sector and some positive developments on the privatization front of some mega state-owned units including PTCL and PSO also played their role allowing the market to consolidate after each rise.

“The rate of return in shares in the form of dividend on an average is calculated between 15 and 20 per cent, much higher than return on any other mode of investment,” analysts said “despite risk associated with the share business, investors are not that fool to stay away as the financial risk is worth-taking.”

The historic year that has just passed into history has witnessed many decade-old records surpassed and some new were established both in terms of single-session trading volume and the KSE 100-share index’s meteoric rise to the new level of 2,700 points.

“Investors are now eying the index level of 3,000 sans US attack on Iraq,” one broker predict. “Massive cash amounts have virtually flooded the stock market as the bait of capital gains appears to be the hallmark of the entire trading.”

The Index started the year around 1,225 and steadily maintained its sustained upward drive to hit the all-time peak level of 2,700, adding about Rs.200bn to the total market capitalization at Rs.594bn, the net rise being about 240 per cent.