Market watch: Policy rate cut fuels rally at PSX

Benchmark index advances 229.86 points to settle at 33,939.49

KARACHI: Stocks rallied on Friday on back of the State Bank of Pakistan's (SBP) surprising move to slash the country's interest rate by 100 basis points to 7%.

The KSE-100 index took off to a flying start, hitting an intra-day high of 319 points as it powered past the 34,000-mark. However, some selling activity tempered gains as the index finished 230 points up, just a few points shy of the 34,000-mark.

Easing US-China trade tensions and rupee stability amid a current account surplus in May 2020 also helped the index rebound.

Despite international crude prices bouncing back, the performance of the exploration and production sector remained dull throughout the trading session.

At close, the benchmark KSE-100 index recorded an increase of 229.86 points, or 0.68%, to settle at 33,939.49 points.

Arif Habib Limited, in its report, stated that the surprise rate cut by the central bank post market yesterday, had the market open 319 points up with 3.8 million shares being traded on the opening bell.

"Cyclicals (cement and steel), which have had high leverage ratios in the past couple of the years were largely the beneficiaries of this rate cut and therefore reflected the same positivity in the market as well," it said.

The report further added that Maple Leaf Cement and DG Khan Cement witnessed the most volumes in the cement sector.

Moreover, exploration and production sector that could have benefited from the overnight bounce back in international crude prices failed to reciprocate and saw muted response during the session.

Meanwhile, banking sector stocks declined further as a result of policy rate cut but couldn’t place significant volumes on the bourse.

Friday, also happened to be the last day of the roll-over week but didnl not cause much of an impact on stock prices, the report maintained.

Cement sector led the volumes with 43.9 million shares, followed by technology (23.8 million) and refinery (14.4 million).

Stocks that contributed positively to the index include FFC (up 57 points), HUBC (43 points), ENGRO (40 points), LUCK (31 points) and DGKC (26 points). While, stocks that contributed negatively include BAFL (down 20 points), HBL (18 points), DAWH (16 points), UBL (12 points), and MEBL (11 points)

Overall, trading volumes rose to 198.2 million shares compared with Thursday’s tally of 168.4 million. The value of shares traded during the day was Rs6.8 billion.

Shares of 339 companies were traded. At the end of the day, 169 stocks closed higher, 149 declined and 21 remained unchanged.

Maple Leaf Cement was the volume leader with 15.2 million shares, gaining Rs1.06 to close at Rs25.94. It was followed by Pakistan Refinery with 13 million shares, losing Rs0.23 to close at Rs0.51 and DG Khan Cement with 12.6 million shares, gaining Rs5.38 to close at Rs84.27.

Foreign institutional investors were net sellers of Rs203.7 million worth of shares during the trading session, according to data compiled by the National Clearing Company of Pakistan.