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50bps cut in policy rate, other developments to keep KSE bullish

50bps cut in policy rate, other developments to keep KSE bullish

KARACHI: The reduction in policy rate by 50 basis points by the Central Bank, the expected IMF tranche and a tangible cut in the prices of petroleum products have given impetus to Karachi equity and experts and analysts expect the market to stay bullish in the current week.

Bull-run kept the Karachi Stock Market (KSE) afloat during the entire past week at Karachi capital market as benchmark KSE-100 index gained 414.03 points or 1.33 percent to close at 31,344.07 as compared to 30,930.04 points of previous week’s closing. The trading remained flat with average turnover of 167 million on daily basis.

Foreigners remained net buyers during the week, buying 10 million worth of shares besides $ 22 million Hum Network share transactions last week.

Experts say that monetary policy will now guide the index the current week where market following 50 basis points slash in policy rate. KSE-100 index continued with its bull run from the previous week after strong institutional participation was seen in index heavy Oil and Gas Development Company (OGDC) (plus 83 points) following government’s decision to call off its 7.5 percent divestment.

Engro which had been a laggard in the recent run-up, was the top index mover this week and contributed 97 points to the KSE-100. Even though gains in oil stocks trimmed on the last two days of the week as international oil prices trended downward, the sector still managed to contribute 99 points to the index.

Invest Cap’s research analyst Abdul Azeem said, “The continued positive sentiments during the week were influenced by the recent developments in the economy. The Prime Minister visited China, Germany and Britain where he inked many contracts mainly building power plants to beat energy crisis. The foreign tours were rays of light for a country with ravenous appetite for Foreign Direct Investment (FDI) and energy.

It is expected KSE to continue its momentum as investors perceive government efforts to resolve energy crisis and jump-start the economy. Similarly the suspension of gas load management plan for textile industry by the government will also add to the overall positivity.

Moreover, the cut in monetary policy will also impact the behavior of the market in week, which is evident from the fact that the stocks started the week on a positive note and gain 333 points or 1.06 percent to reach 31677 points.

On the other hand, the Pakistan successfully completed fourth and fifth reviews with the International Monetary Fund (IMF) last week and the fund has agreed to release the next tranche.

Meanwhile, investor interest was witnessed in the textile sector on the back of expectations of a favourable 5-year textile policy (expected to be announced later this month) and suspension of gas load management plan in Punjab.