Market gains 4.9% WoW amid political, economic positives

The market rebounded significantly this week, closing at 62,816 points, a rise of 4.9% or 2,900 points, overcoming the 3,000-point loss experienced the previous week due to political uncertainties. 

This recovery was spurred by a series of positive political and economic developments as the week commenced on a positive note and saw further uplift after the Pakistan Peoples’ Party and Pakistan Muslim League-Nawaz (PML-N) announced on Tuesday night a coalition setup in the centre. 

Additionally, provincial assemblies, including Punjab MPs taking oaths and the naming of the Sindh Chief Minister on Friday, contributed to the market’s positive trajectory.

Economic indicators played a crucial role in supporting the bullish market trend. January’s current account deficit remained low at $269 million. 

The Federal Board of Revenue reported a 30% year-over-year increase in tax collection from July 2023 to mid-February 2024, with a total collection of Rs5.15 trillion. 

The deregulation of non-essential medications announcement also led to significant gains in the pharmaceutical sector, marking it as the week’s best performer.

The treasury bills auction on Wednesday saw a 126 basis point rise in yields for 3-month papers, indicating market expectations of a monetary policy status quo in the upcoming March 2024 meeting.

However, on the flip side, market participation saw a decline, with average daily traded volumes dropping 15% week-over-week to 298 million shares. 

Other key news included the increase in power sector circular debt, tax proposal submissions for the upcoming budget, a 39% increase in IT exports in January, and a 21% decrease in foreign direct investment from July to January year-over-year.

Sector-wise, pharmaceuticals, woolen, and technology sectors led the gains, while property, synthetic & rayon, and vanaspati sectors lagged. Notably, individual investors were the major net sellers, while mutual funds emerged as significant net buyers.

AKD Research predicted the market’s short-term movements will remain closely tied to political developments and the formation of a stable government. 

In the medium term, interactions with the IMF concerning the second SBA review and the next Extended Fund Facility (EFF) program are expected to be key determinants of market performance. 

The brokerage firm advised the investors to remain cautious and focus on financially robust companies with high dividend yields.