KARACHI, May 27: After a massive fall during the last three sessions, stocks on Tuesday staged a partial rally on strong short-covering at the lower levels after the State Bank deferred for a year 50 per cent exposure limit on CFS lending by the banks to ease the liquidity crunch.

The central bank intervention was well-received by the investors and the banks, who flooded the market with buy stops at the current lows putting the market back on the rails just in one go as was reflected by strong recovery both in the KSE index and the market capital.

The KSE 100-share index recovered 237.47 points or 1.89 per cent at 12,822.25 adding Rs77.309 billion to the market capital at Rs3,953.634 billion. The free float 30-share index also recovered a good part of previous losses, up 436.37 points or 2.97 per cent at 15,144.46.

According to market sources an emergency meeting of the high-ups of the central bank, commercial banks and the KSE held on Monday at the State Bank, which jointly decided to withdraw the 50 per cent limit on CFS investment by the banks in the share business to avert the possible collapse of the market, was said to be the chief stimulating factor behind the strong rally, analyst Ahsan Mehanti said.

“The step ensures an adequate supply of credit lines leaving it to the investors how to use it,” he said, adding: “But many are still in two minds apparently taking the cue how the political wind blows.”

“Liquidity crunch was there but what halted the flow of private money into the shares was the highly volatile political situation and a long whispering that any thing could happen any moment,” analyst Hasnain Asghar Ali said.

He said some other positive news, notably a strong rumour that capital gains tax exemption will be extended for another two years in the national budget due on June 7, also aided a lot of covering purchases at the lower levels.

After having received a massive battering and eroding Rs500 billion from the market capital and 1,700 points or 12 per cent from the KSE index during the last three consecutive sessions, the KSE 100-share index recovered sharply but the underlying sentiment was still terribly shaky.

Floor brokers said snap recovery aside the future market outlook would be decided by the extended institutional support though on selected counters and the trend of political events.

However, the relative weakness of some of the leading banks under the lead of National Bank and Askari Bank and some other blue chips indicated that the recovery may still be inconclusive and the next few sessions will show how investors view the unfolding political scenario, they added.

But the strength of the MCB Bank followed by strong covering purchases, which holds a larger weightage in the index, has raised hopes that others may join it. It recovered Rs15 from the previous large losses followed by Arif Habib Securities and Engro Chemical and credible performance of the leading oil shares.

Leading gainers were led by JS & Co and PSO, which recovered Rs25.90 and Rs19.50, followed by Engro Chemical, Dawood Hercules, Al-Ghazi Tractors, Ferozsons Lab, HinoPak, Pakistan Petroleum, New Jubilee Insurance, Pakistan Oilfields, MCB Bank and Siemens Pakistan, which recovered Rs8.17 to Rs18.05.

EFU Life and Lakson Tobacco suffered fresh fall of Rs21.11 and Rs16.50, respectively. Other prominent losers were led by Indus Motors, Packages, Dadex, Murree Brewery, Pakistan Refinery, Arif Habib Ltd and Exide Pakistan, off by Rs5.15 to Rs10.45.

Trading volume rose to 264m shares from the previous 144m shares as gainers held a comfortable lead over the losers at 196 to 116, with 20 shares holding on to the last levels.

Arif Habib Securities led the list of actives, up Rs2.95 at Rs164.50 on 20m shares followed by NIB Bank, steady by 56 paisa at Rs13 also on 20m shares, D.G. Khan Cement, easy by two paisa at Rs76.25 on 13m shares, National Bank, off Rs3.36 at Rs169.75 on 11m shares, Lucky Cement, higher by Rs4.48 at Rs109.40 also on 11m shares, Bank Alfalah, up by Rs1.36 at Rs41.47 on 10m shares and PTCL, higher by Rs1.96 at Rs41.17 also on 10m shares.

Askari Bank led the other actives, lower 40 paisa at Rs41.45 on 8m shares, followed by Fauji Fertiliser Bin Qasim, up Rs1.62 at Rs34.13 also on 8m shares and Dewan Salman, up 55 paisa at Rs5.50 on 8m shares.

FORWARD COUNTER: MCB Bank came in for strong support at the lower levels and was quoted higher by Rs15.30 at Rs321.39 on 6m shares followed by Arif Habib Securities, higher by Rs6.22 at Rs165.70 on 5m shares, and National Bank, off Rs3.71 at Rs170.05 on 4m shares.