The volume erosion in the preceding year and expected continuation in the current year may impact the price discovery. On valuation terms, it is foreseen that the benchmark is capable of 18.5 per cent growth to reach 13,443 points as the majority of sectors are trading well below their intrinsic fundamental values. Bilal Asif at HMFS said that with all factors considered, our top picks for 2012 are PPL, POL and HUBCO from the energy chain, FATIMA from the fertiliser sector, LUCK from the cement sector and MCB from the banking sector. Albeit majority of the stocks are trading at a significant discount to our valuation, we prefer the abovementioned stocks on the basis of prevalent risk and return scenario, he added. He firmly believes that managing the Current Account would be a daunting task as the Current Account deficit for the 5MFY12 has already surpassed $2.1 billion which is approximately 0.92 per cent of the GDP. Oil bill during 5MFY12 reached the $6.29 billion mark and assuming the average oil prices remain at the same level our oil bill may easily reach the $15 billion mark which would further enlarge the Current Account deficit. ‘If we consider the actual budget deficit estimate of Rs851 billion turning out to be accurate and include the current conversion of power sector circular debt amounting to Rs391 billion, the budget deficit may be around 6.31 per cent (assuming the GDP growth of 3.7 per cent). Non materialisation of privatisation proceeds and excessive subsidies to power sector may further complicate the situation,’ he added.
