KARACHI: The KSE-100 index extended gains in the post-budget session on Wednesday as investors turned optimistic in the wake of lower-than-expected tax measures in the finance bill.
According to Arif Habib Limited analyst Ahsan Mehanti, the stability in rupee-dollar parity during the day and likely creation of a Rs20-billion market support fund for the Pakistan Stock Exchange later this week aided the bullish close of the market.
Earlier, the bourse opened on a buoyant note and rose 478 points in initial trading but bullish sentiments proved short-lived and gains were erased by midday as investors booked profits at higher levels, said Next Capital analyst Faizan Munshey.
The market then traded sideways for much of the day, oscillating between positive and negative territories. A bounce-back in the last half hour of trading helped the index to close with modest gains, he added.
At the end of trading, the benchmark KSE 100-share Index recorded an increase of 278.08 points, or 0.8%, to settle at 34,937.93.
Topline Securities, in its report, said investors turned optimistic post-budget announcement despite a 7.2% fiscal deficit target as tax measures were considered to be lower than expectation for certain sectors like fertiliser. As a result, the benchmark index closed at 34,937 points, gaining 278 points.
“Fertiliser was the best performing sector by adding 82 points to the index while exploration and production companies and cement firms added 108 points cumulatively to the index,” it said.
“Top index contributors during the session were Pakistan Petroleum, HBL, Engro, Fauji Fertiliser and Oil and Gas Development Company, adding 167 points to the index gains.”
Trade volumes increased by 29%, resulting in a 15% increase in trade value.
JS Global analyst Maaz Mulla said equities closed on a positive note with the benchmark KSE-100 index gaining 278 points, closing at 34,938, up 0.8%.
“The bourse kicked off trading on a negative note, hitting a low of -52 points but later on recovered after touching a high of +478 points,” he said. “Finally, the federal budget 2019-20 was announced on Tuesday, which was a negative to neutral event for the banking sector.”
The government has hinted at the creation of the Single Treasury account (TSA) under which it would withdraw all its deposits ($12 billion) from commercial banks.
The corporate tax rate, which was supposed to be reduced by 1% each year, had been frozen at 29% for the next two years. HBL (+2%), UBL (+0.1%) and MCB Bank (+0.7%) remained in the green zone.
Activity was seen in the cement sector despite negativity in the budget where FED was increased. Cement manufacturers were not in a position to pass the additional cost on to consumers.
DG Khan Cement (+4.2%), Fauji Cement (+4.2%) and Maple Leaf Cement (+4.4%) closed near limit up.
Traded value stood at $34 million, up 15% and volumes stood at 151 million, up 29%.
“We expect the market to remain choppy and volatile as things get clearer on the budget front,” he added.
Overall, trading volumes increased to 150.98 million shares compared with Tuesday’s tally of 116.9 million. The value of shares traded during the day was Rs4.9 billion.
Shares of 327 companies were traded. At the end of the day, 216 stocks closed higher, 84 declined and 27 remained unchanged.
The Bank of Punjab was the volume leader with 18.5 million shares, losing Rs0.21 to close at Rs9.79. It was followed by Maple Leaf Cement with 9.96 million shares, gaining Rs0.96 to close at Rs23.02 and K-Electric with 7.5 million shares, losing Rs0.03 to close at Rs4.31.
Foreign institutional investors were net sellers of Rs35.3 million worth of shares during the trading session, according to data compiled by the National Clearing Company of Pakistan.