KARACHI, Aug 17: The weighted average ‘badla’ (Carryover trade — COT) rates rose to 11.9 per cent on Friday, up 2.5 per cent from 9.4 per cent at the end of previous week.
It was the first time in seven weeks that the COT rates rose into double digits. The last time badla rate had entered two digits was on June 25, but that was because most of the financial institutions mature their badla investment near the end of June to portray a better picture of their balance sheets at June closing.
Brokerage house, InvestCap observed that in all the four sessions of the week, average COT rates remained in double digit territory, thereby providing some decent returns to badla financiers, who were not getting ample returns on their investment as the market was flush with liquidity.
Analysts explained that the main reason for the relatively higher rates was the recent rally in the equity markets that had pushed up the KSE index by 1.5 per cent during the previous week (3.6 per cent over the two week period). Volume of trading, which was depressed since June also improved to 138 million shares daily during the previous week.
Total badla investment at KSE on Friday reached Rs4.1 billion, higher by Rs600 to Rs700 million, from the previous weekend level. “This higher number no doubt means more weak holding,” said analyst, but added that compared with the first week of May, when the KSE index was at the same level of 1,840, badla investment figures stood at over Rs5 billion, representing that the current weak holding was far too small and that some genuine buying had indeed taken place.
Brokerage house, IP Securities, which calculates COT on 10 scrips, stated that during the week COT investment and average COT volume had edged higher by 26 and 13 per cent, respectively. “High trading activity in absolute terms in scrips like Hubco, PSO and PTCL indicated some decent investment spreads in the market,” analysts said.
Badla investment in PSO remained buoyant on the back of some foreign buying and the expectations that financial year 2002 might turn out to be the best year to date for the Oil Marketing Company (OMC) in terms of absolute profits, IP Securities stated; PSO is due to announce results on August 22. During the week PSO stock price closed on a three-month high of Rs151.25. Average COT investment in PSO showed a whooping increase of 47 per cent during the current week, amply reflecting the bullish buildup in the scrips ahead of results announcements.
Full year results from two other heavyweights — PTCL and Hubco — are also around the corner, analyst said, which was why COT investments in both those scrips had taken a jump by 17 and 26 per cent, respectively, as punters were holding on to those scrips in the hope of getting a whiff of the news of expected dividend announcements. “Once that news breaks in, weak holders might dispose of their holdings in the scrips to realize some quick capital gains,” said IP Securities analysts, adding that there might be subsequent decline in COT investments in PTCL and Hubco.
Sohail at InvestCap said that he did not expect badla rates to continue to rise at the same pace in the coming sessions. He stated that depending on the direction of the index, rates in badla market could settle at around 10-12 per cent because a further rise in those rates would lure investors to jump into the market and force rates down again.