ISLAMABAD: As corporate season kicks into full swing, investors are keeping a close eye on financial results that are expected to influence the Pakistan Stock Exchange (PSX) performance. Despite the positive trajectory in the outgoing week, investors remain nervous over the possibility of an interest rate hike of 100 basis points (bps) in the upcoming monetary policy.
During the previous week, the PSX index witnessed a gain of 853 points, marking a 1.9 percent increase. However, the rupee experienced a depreciation of 3.2 percent, settling at Rs 286.81 against the US dollar.
Faisal Dhedhi, Deputy Head of Sales at Foundation Securities, highlighted that the market activity is currently centered around corporate earnings and high dividend-yielding stocks, attracting both short-term and long-term investors. Notably, the recent announcement of United Bank Limited (UBL) paying a dividend of Rs 11 with an earnings per share (EPS) of Rs 10.38 has instilled confidence in investors regarding the potential for good returns during the result season.
Furthermore, following the assurance of energy sector reforms in line with the IMF program, stocks in the power chain are expected to gain attention, especially those offering attractive returns.
The political uncertainty surrounding the election has been eliminated, with the expected dissolution of assemblies by August 11 and the interim setup taking over. This development is anticipated to bolster investor sentiment, with the next target for the index projected to be between 47,200 to 48,000 points.
Currency Market Likely to Remain Volatile
The currency market is likely to remain volatile as investors remain uncertain about the policies of the interim government and the newly elected government. However, timely external debt payments could help restore investor confidence.
Portfolio Manager at Darson Securities, Sheheryar Butt, foresees the upcoming week anchored by blue-chip and investment stocks due to their promising dividend prospects. Banking stocks are expected to perform well, and trading activity is likely to focus on this sector, along with selected companies from the fertilizer and technology industries.
The upcoming monetary policy announcement on July 31, with a potential 100bps rate increase, as per an IMF condition, is causing apprehension among investors. Additionally, profit-taking may ensue in the market during the “Ashura” period, which will curtail trading to four sessions. There are also rumors circulating that the former Prime Minister might face arrest before the weekend, which could impact market sentiment.
Positive Trajectory at KSE100 Index
While the KSE100 index is projected to sustain a positive trajectory in the upcoming week, driven by positive corporate result announcements, reduction in inflationary pressures, and foreign investments, certain factors such as international oil price surges, uncertainties surrounding circular debt, and rupee depreciation due to stockpile of letters of credit (LCs) could limit the market’s positive move.
The recent base tariff hike by Rs 4.96 and the possibility of a revision in gas prices are expected to exert pressure on the Consumer Price Index (CPI) in the coming months. However, positive developments regarding the refinery policy may spark interest in the sector.
With ongoing result season, investors are likely to focus on high-yielding stocks in banking, independent power producers (IPPs), and fertilizers. Interest in cement stocks may also increase, given the recent strengthening of the Pakistani Rupee and falling coal prices.
Market analysts predict a positive outlook for the upcoming four-day week, with certain sectors and scrips expected to stay in the limelight. Moreover, the government’s pursuit of new financing opportunities from bilateral and multilateral sources is likely to boost market sentiment if materialized.
