Moving towards the economy and stock market situation IMF has provided us a note of caution with their expectation of inflation at 14 per cent (With base effect 13 per cent to 13.3 per cent), fiscal deficit at 5.3 per cent along with GDP growth of around 3.8 per cent. During the outgoing week the benchmark was in a bearish mood for the majority of the days except Friday. The KSE-100 index moved in a fast and furious mood on Friday turning the weekly returns towards the positive zone. The continual bearish trend which persisted over the past few days finally toned down. The results of top tier stocks were more or less in line with market expectation except OGDC, FFBL, and UBL beat analyst expectations.
Among the 100 benevolent stocks, 65 per cent of the companies remain in red zone while 27 per cent ended the week in the green zone. OGDC with its 163 points contribution can be considered as the major trend setter for the index. Second tier banks including SCB and SNBL outdid the index performance after better results. Fatima with its exceptional result breached the Rs25 per share mark while FFC remained in a rock and roll mood. We believe the current jubilation following by global market performance may fade away, said Bilal Asif at HMFS, adding that but bearish trend over the past few days may provide investors with potential fundamental upside.
Money Market: Despite continual compression in NFA, money supply contraction has decelerated due to substantial rise in NDA. Government borrowing for budgetary support has swelled by RS242 billion to Rs2.9 trillion for the week ending on October 15, 2011. Government borrowing from schedule bank has risen to Rs288 billion whilst net outflow from the banking channel ahead of Eid is likely to keep the liquidity under strain. Inflation for the month of October expected at 10.5 per cent-11.0 per cent is likely stir sentiments on further monetary easing. Primary yields despite tight liquidity as 6months KIBOR has fallen by 6bps to 11.91 per cent. Despite widening rate differentials and looming debt payment, targeted intervention by central bank has also arrested depreciation of PKR against the green back to 0.96 per cent since the beginning of fiscal year from 1.8 per cent at the end of 1QFY11. Lower inflation expectation and stable market yields going forward are likely to persuade investor for participation in longer tenor in the next week’s treasury auction.
