Bulls dominate stocks market as CPI numbers dip to 11yr low


The Karachi stocks market witnessed a bullish trend Tuesday as the analysts said investors’ sentiments were boosted by the inflation numbers which dropped to an 11-year low during November.

Easing consumer price index (CPI) inflation, which the analysts believe would clock in at six percent during fiscal year 2014-15, would pave the way for further monetary easing by the central bank in its monetary policy statement due in January next year. The analysts said the month’s CPI reading was lowest since November 2003 when the index had stood at 4.2 per cent.

Amid higher trades, Tuesday saw the KSE 100-share index gaining 381 points or 1.22 per cent to close at 31,680.72 points as against 31,299.72 points of Monday.

With intraday high and low, respectively, standing at 31,721.83 and 31,299.72, the trading volume at the ready-counter was recorded at 337.8 million shares, showing a growth of Rs 14 million shares when compared to 323.9 million of the previous trading session.

The day saw 397 scrips exchanging hands. Overall value of the stakes traded contracted to Rs 15.6 billion from Monday’s Rs 17.7 billion. Of the traded stocks, 258 gained value, 125 lost and 14 remained unchanged. The market capitalization rose slightly to Rs 7.2 trillion from Rs 7.1 trillion of the previous session. The free-float KSE 30-share index gained 288.61 points and ended at 20,636.17 points.

“Stocks closed high amid higher trades after CPI inflation stood 11 year low in Nov ’14 at 3.96pc (Year-on-Year),” viewed equity analyst Ahsan Mehanti.

Expectations for SBP discount rate cut, fall in NSS rates and easing political concerns after PTI altered dates for protests played a catalyst role in bullish activity at KSE, opined Mehanti, a director at Arif Habib Corporation.

Backed by declining international crude oil prices the CPI inflation in the country is considered to be a major determinant for the State Bank to decide its monetary policy which currently stands at 9.5 percent.

“The lower CPI indicates that further 50-100bps room is still available in SBP discount rate,” said Abdul Azeem, an analyst at InvestCap Research. The low interest rates scenario, the analyst said, would provide further impetus to the country’s equity market, particularly the leveraged sectors.

This is what exactly happened on Tuesday as equity analyst Mehanti said an oversold oil sector led the day’s rally followed by leveraged stocks in cement, textile and fertilizer sectors.

The list of 10 best performing scrips was topped by K-Electric Limited which counted 8.24 million of its listed shares as traded on the day. The utility’s stakes made a 0.2-paisa gain to close at Rs 8.26.

Others to follow were PIA with 26.1 million share trading, Summit Bank 13.9 million, Jahangir Siddiqui 13.1 million, TRG Pakistan 13 million, Bank Al-Falah 12.7 million, Azgard Nine 11.5 million, Engro Fertilizer 10.8 million, Maple Leaf Cement 9.9 million and Engro Foods 9.9 million shares.

“Coupled with likely improvement in forex reserves position, we expect higher cut in policy rate in 2015,” viewed analysts at Topline Research.

Another senior equity analyst Khurram Schehzad said: “there is a lot of value potential left to be topped at the country’s stocks market which stood the best performing equity market in November and the second best frontier market in CY14 to date.”