Market watch: KSE-100 rises over drop in inflation rate

Benchmark index increases 105.19 points to settle at 35,758.52

KARACHI: The KSE-100 index extended gains on Thursday and advanced 105 points due to positive sentiment arising from a slight drop in inflation rate for October 2019.

The Consumer Price Index (CPI) eased to 11% in October 2019 compared to 11.4% in September 2019.

"A buying spree emerged on the back of a slowdown in CPI inflation to 11.04% in October compared to 11.37% in September, and key decisions taken in the Economic Coordination Committee (ECC) to support infrastructure, oil marketing companies (OMCs) and power sector," said Aba Ali Habib Securities in a report.

However, trading remained range bound as inflation reading came in above market expectations and many investors, who expected the State Bank of Pakistan to slash interest rate in the upcoming monetary policy, remained on the sidelines.

Following two sharp spikes in early hours, the market fell below the 35,500-point mark due to speculation over the monetary policy. Once the anxiety subsided, buying activity emerged again and the index managed to erase all the losses and made gains.

At close, the benchmark KSE 100-share Index recorded an increase of 105.19 points, or 0.3%, to settle at 35,758.52.

Arif Habib Limited, in its report, stated that the market traded in a narrow range between -195 points and +181 points, closing the session up by 105 points.

"Higher-than-expected inflation sparked concern among investors about the upcoming monetary policy as a few days ago the market had expected a rate cut," it said.

Selling activity was largely noted in cement and steel sectors, which had earlier enjoyed a consistent rally before and after the announcement of financial results.

Consistent with the recent trading pattern, the technology sector contributed most of the trading volume with 68.2 million shares changing hands, followed by the cement sector (30.4 million) and chemical sector (19.5 million).

Among individual stocks, WorldCall Telecom led the volumes with trading in 45.8 million shares, followed by Pak Elektron (16.7 million) and Invest Capital Investment Bank (13.6 million), the report added.

JS Global analyst Maaz Mulla said in line with expectations, profit-booking was witnessed at the bourse as the KSE-100 index juggled between red and green zones.

The index touched an intra-day high of +181 points and intra-day low of -195 points to close at 35,758. Major contribution to the index came from Engro (+1.3%), Pakistan Oilfields (+2.3%) and Pakistan State Oil (PSO, +3.1%).

On the flipside, major laggards were DG Khan Cement (-4.6%), Fauji Cement (-4%) and UBL (-0.6%).

"Investors showed interest in OMCs on the back of news that the government had linked the revision in OMC margins on petrol and diesel with the average annual consumer inflation," he said. "This is likely to increase their profitability by 6-8% and push up fuel prices."

PSO (+3.1%), Shell (+2.9%) and Hascol (+5%) were major movers of the above mentioned sector.

Profit-booking was witnessed in the cement sector, where DG Khan Cement (-4.6%), Fauji Cement (-4%), Pioneer Cement (-2.5%) and Maple Leaf Cement (-2.6%) closed lower.

Volumes stood at 266 million shares versus 298 million shares traded on Wednesday. "Moving ahead, we expect the market to remain positive in the medium term, however, in the short term profit-taking cannot be ruled out," the analyst added.

Overall, trading volumes decreased to 266 million shares compared with Wednesday's tally of 298.1 million. The value of shares traded during the day was Rs8 billion.

Shares of 366 companies were traded. At the end of the day, 155 stocks closed higher, 191 declined and 20 remained unchanged.

WorldCall Telecom was the volume leader with 45.8 million shares, gaining Rs0.21 to close at Rs1.7. It was followed by Pak Elektron with 16.7 million shares, losing Rs0.01 to close at Rs20.05 and Invest Capital Investment Bank with 13.7 million shares, gaining Rs0.11 to close at Rs0.91.

Foreign institutional investors were net buyers of Rs493.3 million worth of shares during the trading session, according to data compiled by the National Clearing Company of Pakistan.