The benchmark swung both ways during the outgoing week as several global and local factors enhanced the market volatility. The week kicked-off on a bearish note at global markets as Euro zone economic concerns severed along with prevalent weak economic conditions in the U.S hampering the investor’s sentiment. The local benchmark was one of the victims on Monday and lost over 342 points. But index recovered its lost glory on Tuesday as bulls returned to recover the lost ground quite rapidly. The tense relationship with US along with the recent blame game initiated by US from major fronts also shattered the investor’s confidence.
After revision of inflation index, the chances of discount rate cut are glowing as the stocks with healthy dividend yield are in demand. On Friday announcement of downward revision in national saving scheme rate turned out to be a sentiment booster for the benchmark index. Furthermore, with 10-year PIB, proxy for risk-free rate, trading at lower level of 13% further fueled the investor’s sentiment. All the above mentioned factors indicated towards a rate cut in the upcoming MPS. FATIMA with greater earnings expectation and PTC with a healthy expected dividend yield in contrast to PIB or NSS rate seems quite mouth watering. We believe the upcoming week would be dominated by news related to MPS, geo-political situation and upcoming quarterly result season, said Bilal Asif at HMFS.
Monthly Review – September –2011: The month of September turned out to be a recovery month as index gained around 6.25 per cent with fairly impressive average volume of 72 million shares. During the preceding month the benchmark witnessed unprecedented decline of 9.19 per cent, primarily as a consequence of global economic concerns. Our market has nothing in common with the global markets, but our benchmark replicated the same behavior. Incase of global economic slow down our economy would definitely bear the consequences on our exports, industrial productivity and imports but the impact on our economy may not be as huge as perceived by local investors. “The geo-political situation, especially Pak-US ties are in a critical phase with blame game initiated by US also dampening investor’s sentiment. We consider US-Pak ties as a marriage of bilateral needs, hence the relationship may continue with all its flair,” said Salman Vidhani at HMFS. Ease-off in inflation expectation ensured by rebasing and tinkered with inflation index methodology to gauge inflation received further impetus as rates on NSS were drastically slashed to the tune of 78-96 bps. The last trading day of the week observed precipitous dip in secondary yields as benchmark 6M KIBOR fell by 11bps to 13.25% since the beginning of the week. Money supply shrunk despite rise in NDA as NFA continues to contract putting further pressure on feeble Rupees. Furthermore government borrowing from commercial banks has swelled by 176 billion since the commencement of FY11. After calibrated intervention by SBP in exchange market on the advice of finance ministry, Rupee depreciation against greenback was curtailed to 1.78 per cent. Discount rate cut appears imminent in 8th October MPS, strengthening the case for an inverted curve ahead.
