PSX witnesses bearish trend, sheds 588 points

Banking sector remained under pressure due to the super tax clause in the economic reforms package.

KARACHI (Dunya News) – Downward slide continued at the capital market extending the losing streak for fifth consecutive week where uncertainty emanating from confrontation between Pakistan and India forced the investors to stay out of the market where economic woes continued to haunt.

The benchmark index kicked off the week on positive footings; however, it failed to sustain the gains and plummeted 588 points or 1.49 percent, and closed at 38,950 points.

A further contraction was observed in trading activity as the average volume on the all share index stood at 114.16 million shares and 84.5 million shares at 100-index versus 159.46 million shares and 104.97 million shares traded on respective indices in the preceding week.

Foreigners were net sellers of $3.5 million as compared to net selling of $1.33 million in the previous week. On the local investors’ side, Mutual Funds were net sellers of $10.6 million.

Sector-wise, the worst performers for the week were E&P’s and Commercial Banks as they chipped away 357 points, cumulatively.

The banking sector remained under pressure due to the super tax clause in the economic reforms package, said an analyst from Topline Securities.

On the other hand, due to the removal of law barring non-tax filers from purchasing cars, auto assemblers added the most points to the index during the week, totaling 91 points, the brokerage house said.

The approval of the second mini-budget from the National Assembly was the key highlight of the week wherein a number of amendments have been made to bolster the local industry.

The ban removal of car sales to non-filer (irrespective of the engine capacity) is the most notable of all, warranting an up-spiral in car demand going forward.

Cement sales number released over the weekend highlighted a slowdown in local cement dispatches together with an increase in export sales.

This, coupled with an austere demand outlook brought the whole sector under the hammer, slipped by 2.66 percent.

Likewise, power sector failed to gain attraction despite a payment of Rs200 billion from government to ease off the circular debt situation.

An analyst from Habib Metro Finance said that with the approval of the mini-budget and easing tensions at the border, we foresee market reverting to its fundamentals in coming days.

However, an increase in inflationary pressure along with an anticipated deal with the International Monetary Fund (IMF) warrants yet another increase in interest rates.

“With result season approaching its end, we expect range bound activity at the bourse amid lack of triggers and continued geo-political tension”, said an analyst from the BMA Capital Management.

On sectorial front, automobile sales numbers for the month of Feb 19 are expected where any divergence from provisional sales may cause excitement, he said. “Despite reduction of noise from our Eastern neighbor, investors are likely to take a cautious approach”, said an analyst from the Arif Habib Ltd.

Whereas, conclusion of result season could also keep the market range bound. “We do highlight that any clarity regarding a potential IMF program can be a positive trigger for the index”, he said.