From the onset of the current week, the benchmark index kissed the 12k level thrice, but was unable to breach it on closing basis. It seems investors are reluctant to buy stocks over and around the 12k level; hence the market was unable crossover that level. The volumes continued to remain healthy in the preceding three days while on Monday and Tuesday the volumes were fairly low. We believe investors must look at the year to date daily average volumes in two segments, firstly the volumes before the relaxation of CGT which was merely 43mn shares and secondly from the day when investors were inform about the possible address by Mr. Sheikh at KSE, the average daily volume from that day jumped to 124mn shares, said Bilal Asif at HMFS.
The volumes jumped by 2.9x clearly suggest the core issue behind the under performance was CGT. Furthermore investors ignored the political issues completely and started buying valuable stocks which are trading at a sizeable discount to their intrinsic value. The quarterly result season along with annual result season keep the investors interested and excited. The fertilizer twins (FFC &FFBL) announced their results which were well above the analyst expectations. Furthermore bonus announcement by FFC of 50 per cent astounded the investor community. Result of Lucky cement was fairly inline with analyst expectations whereas POL results fell short in contrast with consensus expectations. ‘We believe the stocks which are likely to declare the results in the next few weeks are likely to capture the limelight while the companies already announce the result expectations may be impacted by lack of investor interest,’ he added. JSCL remain in the limelight with a gain of 32.3 per cent in the outgoing week along with a 19 per cent share in total volume traded. Furthermore institutional activity remains thin in contrast with the individuals over the past few weeks. This can be considered as a major reason behind the directionless behavior of the market.
CGT Relaxation: Wildest Party: The year kicked off on a bullish note with a return of 4.65 per cent with average daily volume of 74mn shares. The activity of foreigners was fairly limited while individuals along with companies ruled the market. The visit of the Finance minister along with SECP chief and FBR representatives attracted a full house crowd where Mr. Sheikh announced the relaxations in documentation and other measures which boosted the investor sentiment. The punters and brokers were aware of the CGT relaxation, hence the bull dominated the proceeding on Jan 23, 2012 a day before the announcement and the following Monday. From Jan 20, 2012 to Jan 25, 2012 average daily volume was around 183mn shares depicting investor confidence. The relaxation of CGT may have long term implication on the stock market with investors who were unwilling to invest may return towards the market. Hopefully the volume may return after CGT relaxation which may impact the price discovery on the stock and fundamentally valuable stocks may achieve their intrinsic worth.
Money Market: Inflation for the month of Jan’12 crawls back-up in double digit to 10.10 per centYoY whilst the YTD average was restricted to 10.76 per cent against 14.26 per cent for the corresponding period last year. Market yield have responded to the low inflation numbers with 6M KIBOR down to 11.83 per cent depicting retrenchment of 20bps since the beginnings of the calendar year.
Ease-off in inflation and trend in market yields have ignited the hopes of further DR cut in the upcoming MPS to propel the growth engines. However further DR cut remains contentious with unwavering monetization, depreciation of PKR against greenback and rise in energy product prices to likely cause inflationary pressures to resurface as low base effect pan out.