The stock market return for the previous fiscal year was around 28.53 per cent with volumes of 95 million shares which is significantly lower than the preceding year’s average daily volume of 160 million shares. In the beginning of the last fiscal year the Government implemented CGT which impacted investor participation immensely as they preferred not to invest at the local stock market.
Despite all odds, the benchmark return was quite good, especially when you consider the geopolitical and financial uncertainties the country is facing. Furthermore, the attitude of political parties especially the ruling party towards economic reform in order to improve the economy of the country seems quite weak. During the week the benchmark index posted a meager increment of 20 points with average daily volume of 56 million shares.
Participation of foreign investors was marginal, excluding the off-market transaction of BYCO and new “other” stocks. Furthermore, the merger of Arif Habib and MCB asset Management was halted at the last minute by SECP without quoting any major reason. Throughout the week fertilizer stocks were in the limelight. This was because of Engro’s new plant COD. Later news of a large hike in feed gas prices provided investors with a lucrative opportunity.
It is believed that with an expected rise in gas prices, fertilizer manufacturers will pass on the prices to consumers. In such a situation, Engro and Fatima’s new plants will benefit the most as their gas prices will remain unchanged due to the Fertilizer Policy of 2001, said Bilal Asif at HMFS. Looking at the top performers and losers, Nestle Foods, Fatima and Unilever food were the major gainers, whereas NML, EPCL, PICT and PSO were among the major losers. The top five banks lost value, oil stocks were fairly muted while activity was fairly heavy in fertilizer stocks.
However, the performance was unable to push investors towards investment, he added. Furthermore, low cap stocks generated ample volumes but were unable to impact the benchmark index. Inflation for fiscal year 2011-2012 is expected to be around 14 per cent which is within the expected range. Furthermore, with reduced commodity prices and reduction of GST by 1% there might be a decrease in inflation in the upcoming months.
However, as the holy month of Ramzan approaches overall inflation numbers are expected to rise in the short term. Corporate results of FY11 are expected to be announced shortly and their affect on the market is yet to be seen.
