The stock market remained lackluster throughout the week, with the benchmark index losing 2,124 points or 2.8%, closing at 73,754 points on Friday.
According to a note sent by AKD Research, the downward trend was primarily driven by concerns over the potential elimination of the final tax status for capital gains tax (CGT) and dividends, which would align their tax rates with the normal income tax rate.
Additionally, Moody’s statement suggesting a status quo in the upcoming Monetary Policy Committee (MPC) meeting also exerted pressure on the market.
On the macroeconomic front, inflation in May 2024 eased to an 11.8% year-on-year, the lowest in 30 months, resulting in positive real interest rates exceeding 1,000 basis points.
This fueled market expectations for rate cuts in the June 10 MPC meeting.
Furthermore, announcements of monetary easing from developed economies, including the European Central Bank and the Bank of Canada, amplified this sentiment.
Additionally, May’s trade deficit shrank by 15% month-on-month to $2.1 billion, while record-high remittance inflows of $3.2 billion hinted at another potential current account surplus, raising expectations that FY24’s current account could close in surplus.
As the FY25 budget approaches, new tax measures have surfaced with the IMF demanding an additional Rs 2.0 trillion in revenue, while local officials are considering additional taxation of Rs 1.2-1.4 trillion.
With overall market volatility, participation decreased by 5.3% week-on-week, with the average daily traded volume falling to 423 million shares compared to 447 million shares in the previous week.
The PKR appreciated by 0.05% week-on-week to close at 278.2 against the USD.
Other major news during the week included the FBR exceeding its May revenue target by Rs 15.21 billion, Pakistan’s obligation to repay $10 billion by July, a 7% increase in May petroleum product sales to 1.39 million tons year-on-year, and an almost 8% increase in cement sales during May.
Sector-wise, Paper & Board, Jute, and Textile spinning were among the top performers, up 18.4%, 12.3%, and 5.0% week-on-week, respectively. Conversely, Investment Banks/Securities companies, Exploration & Production, and Refinery were among the worst performers, declining by 8.6%, 5.7%, and 5.5% week-on-week, respectively.
In terms of flows, major net selling was recorded by Individuals with a net sell of $8.9 million.
On the other hand, Insurance and Banks/DFI absorbed most of the selling with a net buy of $7.0 million and $6.8 million, respectively.
Top-performing companies during the week were YOUW (up 5.3% week-on-week), SHEL (up 4.5% week-on-week), MTL (up 3.9% week-on-week), SEARL (up 3.2% week-on-week), and TRG (up 2.8% week-on-week). The top laggards were CEPB (down 9.3% week-on-week), FFBL (down 8.8% week-on-week), PSX (down 7.6% week-on-week), PIBTL (down 7.3% week-on-week), and OGDC (down 7.3% week-on-week).
Brokerage frims forecasted the upcoming MPC meeting on June 10th will be in the spotlight, with any rate cut expected to shift the market’s focus towards cyclical sectors.
Additionally, the Federal Budget 2025 will significantly influence investor sentiment.
“Given the prevailing uncertainties, the market is likely to remain volatile in the short run, with clarity expected to emerge after the budget announcement,” it added.
