KARACHI – The local bourse had a week of slim volumes of 62.56 million, indicating that lack of investor participation has largely impacted performance. The index moved within a band of merely 289 points whilst the benchmark shrunk 54.48 points within the week.
Foreign participation, in the week, was up by a meager $4.82 million. The SBP allowed forward cover for exports, to allow the banking industry fetch better returns from dealing in foreign exchanges, while forward cover would also provide a hedge for exporters in case of rupee depreciation.
The SBP is expected to announce its monetary policy, on March 26, 2011, where it is expected that the regulator would maintain the status quo. Our call on policy rate is based upon recent inflation numbers of CPI of 12.91 percent, while current inflation stood at 14.33 percent, said Bilal Asif at HMFS. He added that recent petroleum price hike, by the government along with gas and electricity prices hike, would impact inflation numbers.
Apart from the above mentioned factors, the government’s mini budget would impact general prices index especially sugar, fertiliser, cement and other imported commodities. Despite an expected rise in inflation, year-end CPI inflation is expected to be around 14.0 percent and 14.5 percent, largely backed by the base year effect. Furthermore, relationship between NDA and NFA also predicts reemergence of inflation.
Among the benevolent index weighted stocks, 50 percent moved downwards, while rest of the participants posted minor gains. Largely, the index weighted stocks were tilted towards the negative side, hence the index moved in negative territory. Cement price hike in the north provided some hope to cement manufacturers. Furthermore, hike in urea prices, during the week, may not impact profitability as the increase in prices is largely due to withdrawal of GST exemption. “We believe that absence of stock specific and economy related triggers would result in lackluster behaviors in stock market, therefore, staying on the sideline or trading in relatively less risky stock, that can affect the overall portfolio performance, is recommended”, said Bilal Asif.
