Market watch: Stocks dragged down by heavy rupee depreciation

Benchmark KSE-100 index declines 320.53 points to settle at 33,971.12

KARACHI: The stock market once again dived into the red zone as the latest round of rupee depreciation pushed the benchmark index down by over 700 points in intra-day trading on Thursday.

The rupee dropped to an all-time low at 148.50 to the US dollar in the inter-bank market earlier in the day, weakening by over 5%, or Rs7.10, from Wednesday's close of 141.4.

The fresh depreciation prompted renewed stock selling as investors reacted with panic to the latest development. As a result, the KSE-100 index, after a brief upward opening, dropped to an intra-day low of 33,574.85 points.

The benchmark KSE-100 index fell over 650 points in immediate reaction to the rupee's fall, stockbrokers said. The rupee depreciation would badly impact earnings of companies listed at the Pakistan Stock Exchange (PSX).

"It will also narrow down return on investment in stocks or turn it negative going forward," said a stock trader.

The selling pressure was witnessed across the board as investors opted to offload stocks.

Arif Habib Limited Head of Equity Sales Saad bin Ahmed said there was renewed stock selling on return of volatility in the currency market.

The fresh rupee depreciation of over 5% to 148.50 in the inter-bank market has made imports of raw material quite expensive, especially by listed companies in sectors like pharmaceutical, cement and auto.

"The rupee volatility, however, is good for oil, exploration and production, and textile sectors," he said. However, for the time being such sectors also came under selling pressure.

The stock market had rallied briefly in the morning following Prime Minister Imran Khan's meeting on Wednesday to control the rupee's value, which gave confidence to investors.

At the end of trading, the benchmark KSE 100-share Index recorded a decrease of 320.53 points, or 0.93%, to settle at 33,971.12.

Topline Securities, in its report, stated that the KSE-100 succumbed to the pressure from rupee's depreciation as the currency movement signaled the potential start of prior actions that the government committed to take while agreeing on an International Monetary Fund (IMF) loan programme.

"The weakening of the rupee even failed to encourage investors targeting the export-focused sectors, like information technology, textile and selected chemicals. NetSol, the largest IT-sector exporter in Pakistan, and AVN (Avanceon Limited) lost 3-5% of their share prices," it said.

For the third consecutive day, the independent power producers (IPPs) outshined other stocks due to multiple factors like increase in power tariff, which would ensure a smooth collection of cost from the consumers, government's crackdown on power theft, which had saved around Rs60 billion so far, and planned resolution of the circular debt issue as witnessed in the 2013 IMF programme, the report added.

Nishat Chunian Power and Nishat Power Limited gained 13-14% each in the past three days. Similarly, Hubco was up 7%.

Overall, trading volumes fell to 108.6 million shares compared with Wednesday's tally of 110.9 million. The value of shares traded during the day was Rs3.8 billion.

Shares of 320 companies were traded. At the end of the day, 45 stocks closed higher, 266 declined and nine remained unchanged.

K-Electric was the volume leader with 14.6 million shares, losing Rs0.22 to close at Rs4. It was followed by Pakistan International Bulk Terminal with 6.9 million shares, losing Rs0.7 to close at Rs8.04 and Unity Foods with 6.5 million shares, losing Rs0.95 to close at Rs9.25.

Foreign institutional investors were net buyers of Rs33 million worth of shares during the trading session, according to data compiled by the National Clearing Company of Pakistan.