Despite a 100bps reduction in the policy rate last Friday, the outgoing week started in the red zone to lose 203ppts. Market remained volatile during the mix bag news to close the week almost flat with benchmark index at 33,837ppts. The benchmark index remained range-bound due to lack of major triggers. Although optimism emanated from the interest rate cut initially was neutralized by profit taking by investors before the upcoming long holiday.
On the macroeconomic front, provisional GDP growth figures released by the Ministry of Finance depicted a 0.4% contraction in the FY20. This estimate further deteriorated investors’ confidence. However, this number was better than the estimates shared by the different International Financial institutions (IFIs) but still one of the lowest in decades.
Moreover, while successful issuance of PKR200bn Sukuk kept the investors engaged in energy chain stocks. On the fiscal front, the statement of adviser to the PM on Economic Affairs that the Government will not introduce any new tax in the upcoming budget was a sigh of relief for the business community. On the monetary side, cut-off yields of recently held T-bill held auctions remained 5/19/15bps lower compared to secondary market yields in 3/6/12 month tenors respectively.
In the backdrop of aforementioned developments, KSE-100 index close the week at 33,837pts after eroding the initial gains. Market participation during the week saw a decline where ADTO clocked in at 205mn compared to 220mn translating into a decline of 7% WoW while ADTV increased by USD 47.7mn (up 22% WoW). For the week, foreign investors were net sellers with net outflow of USD8.7mn whereas among domestic participants, individuals and insurance were major buyers with inflows of USD11.3mn and USD4.9mn.
Going forward, we expect budget proposals to drive the market sentiment. On the other hand, the number of COVID-19 cases is expected to surge after complete suspension of the lockdown. As per the ongoing situation, failure to implement SOPs may result in surge in the cases, going forward. As per the market is concerned, we believe that the market is currently trading at attractive levels where we suggest gradual accumulation of fundamentally sound scrips at these levels to achieve significant gain in the medium to long run. Our top picks include, OGDC, POL, HBL, MEBL, LUCK, DGKC, FFC and EPCL. (BMA Capital Management Ltd.)