KARACHI: The stock market extended its winning streak for the fifth consecutive week with the KSE-100 index notching up gains of 276 points and closing at 37,608.

It would have scaled higher but for a sharp retreat on Thursday when the index fell by 226 points and settled at 37,578. The index moved back in the positive territory on the last trading day dispelling investors’ fears of the return of the bear. The local exchange is following in the footsteps of global equities which are hitting new highs as the world economy is showing signs of recovery.

There were many positives for the PSX to continue to stage a rally. Steep decline in Covid-19 cases of new infections and fatalities and speedy recovery provided the government opportunity to ease smart lockdowns. Growing foreign exchange reserves; record remittances; and the several rate cuts by the SBP aggregating to 625 basis points helped corporates reduce finance costs with the benefits passing down to the bottom lines.

All of that provided confidence to the investors to re-enter the equity markets. The growing participation was apparent by jump in volume which remained high as the PSX reverted to the pre-coronavirus trading hours. Individuals who were major sellers on Thursday that saw the bears drive out the bulls for a day were spooked by uncertainties over the pandemic situation post-Eid and the government response, worst of which could be return of the lockdowns. Results season had started with Habib Bank announcing better-than-expected numbers on Friday.

Foreigners continued to sell shares amounting to $9.3 million which nonetheless was much lower than the sell-off in the sum of $27.4m the earlier week. Outflow was witnessed in commercial banks amounting to $2.9m and exploration and production $1.7m. On the domestic front, major buying was reported by companies $7.3m and insurance of shares worth $7.0m.

Average volume settled at 413m shares while mean value traded clocked in at $97m. Analysts at Arif Habib Ltd calculated the sector-wise positive contributions which came from commercial banks, increasing by 253 points, power generation and distribution 76 points, automobile assembler 31 points, textile composite 28 points, and technology and communication 17 points.

The index was dragged down by cements, decreasing by 60 points, oil and gas exploration companies 38 points, and chemical 19 points. Scrip-wise major gainers were Habib Bank, up 128 points, MCB 64 points, Hub Power 58 points, Bank Al Habib 35 points, and Millat Tractors 31 points.

Going forward, investors’ sentiments may be dominated by the shortened trading week due to Eid holiday and the rollover of future contracts. That could lead to profit-taking by short-term investors. However, market gurus believe that funds could continue to flow in the bourse as economic activity shows signs of revival; the ban on institutions to park money in National Saving Schemes; stability of the rupee and the increased flow of corporate financial results where any positive surprises could send prices of stocks higher.

The uncertainty over the monetary policy was also lifted as at the end of the week, the State Bank clarified that the next meeting was not due until September as already policy rates had undergone quick changes over the past few months.

Published in Dawn, July 26th, 2020