KARACHI: The new fiscal year started out on a happy note for the stock market as the equities continued to head north in all five trading sessions. The KSE-100 index gained 1,112 points (3.3 per cent) and closed at 35,051, breaching the psychological level of 35,000 points and clearing the way for a further bull run.

The week began on the terrifying event of a terrorist attack on the market in the morning of first day. Due to the valiant defence put up by the State’s Rapid Response Force and the PSX’s own security guards, the assault was thwarted with the exchange saved from a catastrophe. However, it did not dampen investors’ mood as the bourse’s management put up a bold front and kept the business going without a minute’s break during the shootout.

Other positives that encouraged investors to accumulate scrips during the week was manifest in significant surge in market activity included strong rebound in average daily volumes and their value which went up by 42pc and 46pc, respectively.

The State Bank announcement of cut in policy rate by another 100 basis points to 7pc provided the ground for investors to deploy funds in equities as it increased the relative attractiveness of stocks over the other asset classes such as fixed income instruments and National Saving Schemes.

Investors also derived confidence about the economy due to a spate of news of foreign exchange inflows from various sources such as World Bank, ADB, AIIB and China, with a large chunk reflected in the end-of-the-week forex reserves which jumped to $11.23 billion. Moreover, headline inflation for June clocked in at 8.59pc, taking FY20 CPI average to 10.74pc, in line with SBP forecasts of below 11-12pc.

Foreign selling intensified to $20.5 million compared to net sale of $9.9m the preceding week. Outflow was witnessed in commercial banks amounting to $8.8m and exploration and production $3.9m. On the domestic front, major buying was reported by insurance of stocks worth $17.5m, followed by companies in the sum of $9.6m. Average volume jumped 42pc to 251m shares while mean value traded clocked in at $51m, up by 45pc.

Oil and gas marketing companies were relieved as their inventory losses were minimised by the government’s announcement to pass on some of the impact of increasing energy prices to end consumers by increasing petrol price by Rs25 per litre which was followed by the potential reduction of Petroleum Development Levy by Rs10 a litre. Exploration and production received support from increasing international oil prices. The surge in urea offtake to 76pc month-on-month in June reinvigorated investors’ interest in fertiliser.

Sector-wise positive contributions came from commercial bank, higher by 176 points, cement 170 points, oil and gas exploration 140 points, fertiliser 136 points, and technology and communication 85 points. Among scrips, major gains were made by Lucky Cement, up 107 points, Oil and Gas Development Company 81 points, MCB 72 points, TRG 59 points and Pakistan State Oil 50 points.

Going forward, most market strategists expected the bull run to continue mainly as the government was easing the lockdown in the face of flattening the fatalities curve, slowing pace of new Covid-19 cases and faster recoveries. Given further inflow of funds, SBP’s foreign reserves were expected to be comfortable, which experts said would stabilise the rupee-dollar parity.

Published in Dawn, July 5th, 2020