Stocks fall for second day as caretaker government formation looms

Stocks fell for the second day on Friday as investors booked profits ahead of the weekend amid political uncertainty over the formation of a caretaker government before the upcoming elections.

The Pakistan Stock Exchange's benchmark KSE-100 index fell 0.05 percent, or 25.47 points, to close at 48,585.72, after touching a high of 48,840.27 and a low of 48,427.99 during the session.

"The market was lackluster today as investors remained cautious due to the expected dissolution of the National Assembly and the caretaker setup next week," a dealer said.

The market opened in the positive zone and rose to an intraday high of 48,840.27, up 229.08 points. However, at mid-day, the index succumbed to selling pressure and hit an intraday low of 48,427.99, down 183.20 points.

Traders said the market is now looking forward to next week's developments, including the expected dissolution of the National Assembly and the subsequent caretaker setup, to continue the journey forward.

Analyst Ahsan Mehanti said stocks closed lower on weak economic outlook. "Dismal data on oil sales falling by 7% year-on-year, textile exports falling by 15 percent year-on-year, and DAP fertilizers sales falling for July 2023, hike in industrial power tariff, and weak rupee played a catalytic role in the bearish close," he said.

Topline Securities said in its post-trading note that the benchmark index opened on a positive note and gained to make an intraday high of 229 points. However, some profit-taking was observed during the latter part of the day as investors preferred to book some profits before the weekend.

Major positive contributors to the index were OGDC, MTL, MEBL, KAPCO, and CNERGY, which cumulatively contributed 148 points to the index. On the flip side, ENGRO, UBL, MCB, SYS, and HBL lost value to weigh down on the index by 138 points.

Traded volume and value for the day stood at 331 million shares and Rs12.5 billion respectively. CNERGY was today's volume leader with 67 million shares. Arif Habib Limited said the index temporarily dipped below the previous day's low, but it managed to hold its ground above the 48,000 mark.

"Today's market exhibited a more selective trend, highlighted by OGDC PA (+3.26pc), PRL PA (+4.62pc), and MTL PA (+3.94pc) leading the surge, while the cement sector faced a collective decline. Notably, ENGRO PA, UBL PA, MCB PA, and SYS PA exerted the most significant downward pressure on the index," the brokerage said.

The index managed to gain 3 percent on a weekly basis on the back of a bull-run that started from the staff-level agreement with the International Monetary Fund.

Dealers said the bull run during the week can also be attributed to State Bank of Pakistan decision to maintain policy rate at 22 percent and optimism regarding economic development under umbrella of SIFC where Pakistan has in principle approved 28 projects worth billions of dollars that would be offered to Gulf countries for investment with the long-term objective to reduce reliance on loans and imports.

Traders said that the index faced a downward movement of 26 points as United Bank Limited experienced a significant decline of 42 points, contributing to the overall decrease. The fertilizer sector also struggled, eroding 55 points. However, despite the challenging performance, the trading remained active with a turnover of 210 million shares.