KARACHI: The stock market showcased range-bound behaviour during the outgoing week. Although the KSE-100 index managed to leap forward in three of the five trading sessions, investors’ hesitation to keep shares over the week-end resulted in heavy profit-booking in the last session. Overall, the index gained 620 points, or 1.4 per cent, over the week to settle at 45,522 points.

Several positive developments kept investors' interest alive in risky equities. The Monetary Policy decision to hold the policy rate at 7pc helped boost investor sentiments. Yet the major trigger was the IMF’s executive board’s approval of release of $500m tranche under $6bn Extended Fund Facility (EFF) with positive comments on Pakistan making headway in the reform agenda in key areas.

The oil stocks remained upbeat on expectations of resolution of circular debt issues as the first tranche of payment to IPPs was expec­ted this month. Refi­neries also stayed in the limelight throughout the outgoing week in anticipation of declaration of a new refinery policy.

Several economic triggers also influenced the market including contraction in current account deficit for the month of February by 75pc month-on-month, taking the balance so far during the year to a surplus of $881m.

On the flip side, investors were peeved at the resumption of IMF’s Extended Fund Facility with strings tied to it, the worst being revoking a number of tax exemptions allowed to the corporate sector.

Going forward, market experts predict a positive week ahead on the back of improving macroeconomic indicators; the resumption of IMF programme and the strengthening of rupee.

Investors are also confident of the disbursement of first installment to the IPPs, under the agreements signed in February, which could stir the power sector stocks. Given the government’s renewed incentives for the construction of low cost housing, traders see an uptick in demand for cyclicals cement and steel.

On the flip side, the sharp increase in Covid-19 infection with positivity rate going up to 10pc, raises concern in the minds of investors. The government has already begun smart lockdown in several cities while the fast pace vaccination could ease some of the concerns.

Further, the inflation for the month of March is projected by economists to clock in at 9.78pc up from 8.70pc in February. The tax exemptions withdrawals and the expected considerable rise in energy costs are also dampeners on investor confidence.

Published in Dawn, March 28th, 2021