KARACHI: The stock market remained volatile as mounting political uncertainty unnerved investors indulged in panic-selling, dragging the benchmark index below 79,000 in the outgoing week.

Arif Habib Ltd (AHL) said the market remained negative despite the recent $7 billion Staff-Level Agreement between the International Monetary Fund and Pakistan, the commencement of result season and the anticipation of a rate cut in the upcoming monetary policy.

This bearish trend was mainly driven by political noise. On the economic front, foreign direct investment fell 37 per cent month-on-month to $169 million in June. The State Bank of Pakistan’s foreign exchange reserves witnessed a massive outflow of $397m to $9bn in the week ending July 19.

In addition, power generation dropped to its lowest level in four years to 127,167 GWh in FY24. On the exchange rate front, the rupee depreciated by 0.21 paise or 0.1pc to Rs278.34 against the US dollar.

As a result, the benchmark KSE 100 index settled at 78,030 points after losing 2,089 points or 3pc week-on-week.

During the outgoing week, the government announced plans to withdraw from the fuel pricing process, giving OMCs a free hand. Other significant developments include banks being allowed to charge off fully provisioned non-performing loans, and the Special Investment Facilitation Council endorsed refineries’ concerns that the budgetary measures could spoil a $6bn plant upgrade programme.

Sector-wise negative contributions came from power generation & distribution (153 points), cement (111 points), commercial banks (107 points), oil & gas Exploration companies (96 points) and fertiliser (83 points).

However, the sectors that mainly contributed positively were technology and communication (31 points), chemical (27 points), automobile assembler (19 points), real estate investment trust (5 points) and textile spinning (2 points).

Scrip-wise negative contributors were Hub Power (120 points), Dawood Hercules (84 points), United Bank (56 points), Engro Corporation (49 points) and Pakistan State Oil (45 points). Meanwhile, scrip-wise positive contributions came from Meezan Bank (49 points), TRG Pakistan (42 points), Engro Fertiliser (35 points), Lucky Core Industries (30 points) and Fauji Fertiliser Bin Qasim (18 points).

Foreigner buying continued during the week, clocking in at $4.6m compared to a net buy of $9.3m last week. Major buying was witnessed in oil and gas marketing companies ($1.4m) and commercial banks ($1.2m). On the local front, selling was reported by mutual funds ($5m) followed by individuals ($1.7m).

The average volume plunged 27.3pc to 337m shares, while the average value traded settled tumbled 41.7pc to $56m week-on-week.

The market is expected to remain positive going forward due to anticipation of a potential rate cut in the Monetary Policy Committee meeting scheduled for Monday. The continuation of the results season next week will further maintain the positive momentum.

According to AKD Securities Ltd, the IMF executive board’s expected approval next month will likely support bullish momentum.

Published in Dawn, July 28th, 2024