KARACHI: The modest interest rate hike of 100 basis points with a State Bank of Pakistan (SBP) assurance of no further increase in the near term lifted the investor sentiments with the result that the stock market closed the outgoing week on a bullish note.

The benchmark KSE-100 index posted a week-on-week gain of 505 points, or 1.2pc, at 43,900.68.

According to Arif Habib Ltd, the Pakistan Stock Exchange began the week on a negative note amid anticipation of a massive hike in the policy rate. Moreover, the expectation of the announcement of a mini-budget further dented the sentiment.

However, the market recovered post-monetary policy announcement as clarity was provided by the SBP in its forward guidance. The central bank also disclosed that it is close to achieving a mildly positive real interest rate, which further boosted investor sentiment as the index went up by 1,200 points on Wednesday. In addition, on the external front, growth in remittances by 9.7 per cent to $12.9bn in 5MFY22 was a positive development.

However, bears returned as investors resorted to profit-taking. Furthermore, the rupee witnessed another all-time low of Rs178.04 against the US dollar in the interbank market.

According to AKD Securities, the sentiment was disturbed by the recently concluded T-bill auction with the cut-off yield remaining flat, reflecting a large divergence between the current policy rate and the yield. The average trading volume also improved to 265.0m shares against 203.8m shares in the previous week.

Furthermore, the IMF projects gross debt at 83.4pc of GDP and SNGPL suspends gas supply to captive power plants in Punjab.

Foreign selling continued this week, clocking in at $3.5 million compared to a net sell of $0.99m last week. Major selling was witnessed in cement sector ($1.9m) and technology and communications ($1.9m). On the local front, buying was reported by companies ($5.1m) followed by individuals ($2.7m). Average volumes clocked in at 265m shares (up by 30pc weekon-week) while average value traded settled at USD 84mn (up by 13% WoW).

Sector-wise positive contributions came from cement (282 points), technology & communication (173 points), textile composite (74 points), engineering (70 points), and refinery (50 points). Whereas, sectors that contributed negatively were commercial banks (208 points) and fertiliser (17 points). Scrip-wise positive contributors were TRG (112 points), Lucky Cement (111 points), MLCF (45 points), System Ltd (43 points) and CHCC (36 points). Meanwhile, scrip-wise negative contribution came from MCB Bank (71 points), UBL (63 points) and MEBL (29 points).

Gurus expect the market to remain positive in the upcoming week. With the recent injection by the SBP via open market operation for 63 days, money market yields are expected to come down further.

Published in Dawn, December 19th, 2021