Market watch: Inflation concerns fuel market’s plunge

Benchmark KSE-100 index falls 828.15 points to settle at 44,222.91

KARACHI:

Bears maintained their grip on the stock market on Tuesday as the KSE-100 index experienced another round of battering and dived over 800 points, losing a cumulative 1,614 points in a two-day plunge.

Inflation concerns arising from soaring commodity prices and rising yields of government papers shattered investor confidence. Widespread uncertainty about political developments exacerbated the market’s decline.

All index-heavy sectors lost major ground and closed with substantial losses.

Earlier, trading began on a negative note and the market remained on the downtrend till noon, shedding over 1,000 points.

Later in the session, the investors brushed aside some of the concerns and lifted the market upwards. Despite the recovery, the KSE-100 index failed to sustain the 45,000-point barrier.

At close, the benchmark KSE-100 index recorded a decrease of 828.15 points, or 1.84%, to settle at 44,222.91 points.

Arif Habib Limited, in its report, stated that the market faced another thrashing from investors on the back of rising inflation and political uncertainty. Institutional investors were known to have faced redemptions, which resulted in offloading of recently bought positions, especially in cement and steel sectors, it said.

Expectation of increase in inflation, leading to a hike in the policy rate, had recently caused havoc, pushing investors to look for safe-haven stocks, it said. Resultantly, the power sector saw gradual accumulation of stocks, particularly of Kapco and Hubco.

The banking sector also experienced brisk buying with limited price gains. Cement, steel, technology, oil and gas marketing and exploration and production sectors saw significant price falls, the report said.

JS Global analyst Maaz Mulla said carnage was witnessed at the bourse as the KSE-100 index touched intra-day low of -1,105 points before closing at 44,223, down 828 points.

“This pressure was on the back of likely redemptions of mutual funds,” he said.

TRG Pakistan (-5.9%), Systems Limited (-6%), DG Khan Cement (-7.3%), Lucky Cement (-1.7%), PSO (-3.4%), Pakistan Petroleum (-2.7%) and Cherat Cement (-7.3%) were among the major laggards, which dragged the index down.

Volumes improved by 7% day-on-day, standing at 492 million shares as compared to 460 million shares in the previous trading session.

Ghani Global Holdings (+6.5%), Unity Foods (-6.8%) and TRG Pakistan (-5.9%) led the volumes with 100 million shares changing hands.

The cement sector continued its downward march where big players lost ground. DG Khan Cement (-7.3%), Pioneer Cement (-7.3%), Cherat Cement (-7.3%) and Fauji Cement (-4.5%) were the major losers of the sector.

The refinery sector followed the same trend where Attock Refinery (-7.5%), National Refinery (-5.6%) and Pakistan Refinery (-6.8%) shed value.

“Moving forward, we expect the bearish sentiment to continue on the back of political uncertainty, and potential redemptions in mutual funds are likely to cause further selling pressure,” the analyst said. “Hence, we recommend investors to remain cautious.”

Overall trading volumes rose to 492.3 million shares compared with Monday’s tally of 459.9 million. The value of shares traded during the day was Rs23.4 billion.

Shares of 419 companies were traded. At the end of the day, 58 stocks closed higher, 343 declined and 18 remained unchanged.

Ghani Global Holdings was the volume leader with 41.2 million shares, gaining Rs1.39 to close at Rs22.84. It was followed by Unity Foods with 33.3 million shares, losing Rs2.09 to close at Rs28.87 and TRG Pakistan with 25.5 million shares, losing Rs8.62 to close at Rs137.16.

Foreign institutional investors were net buyers of Rs148.4 million worth of shares during the trading session, according to data compiled by the National Clearing Company of Pakistan.