Investors exit stocks on eve of monetary policy meet

Stocks took a battering on Monday, the eve of December monetary policy meeting, widely anticipated to top up the interest rate by around 100 basis points (bps) or may be more to arrest inflation at the expense of growth, traders said.

Capital market’s main gauge KSE-100 Share Index fell 519.41 points or 1.20 percent to 42,876.37 points at Pakistan Stock Exchange (PSX). Zafar Moti, former director PSX, said the market remained in the negative momentum since the beginning of the session amid thin volumes, mainly owing to anxiety as to what upcoming monetary policy had in store for investors.

“There are two schools of thought. One believes the central bank will increase the policy rate by 100bps. If it happens the market will survive, as it has already absorbed it.”

While the pessimist clan was betting on a 200 to 225bps hike, which would definitely damage the market sentiment, he said. “Market activity will start on Wednesday after the Monetary Policy announcement on today (Tuesday),” Moti said.

JS Research in its market wrap said the sentiment continued to remain bearish due to concerns over the economic outlook, further monetary tightening, and the geopolitical situation.

“Going forward, we expect range-bound activity to continue and investors are hence recommended to avail any downside as an opportunity to buy in the banking and energy sectors,” the brokerage suggested.

In line with the benchmark, KSE-30 Shares Index also shed 221.32 points or 1.31 percent to close they day at 16,679.45 points.

Volumes shrank 29 million shares to 150.38 million shares from 179.17 million on the last trading day, while traded value came down to Rs5.27 billion from Rs6.73 billion. Market capital dropped to Rs7.367 trillion from Rs7.454 trillion. Out of 331 companies active in the session, 65 posted gains, 250 losses, while 16 remained unchanged.

Topline Securities in a post-market note said investors were waiting for the monetary policy announcement.

The market opened on a slightly positive note; however, the index came under pressure and traded negatively throughout the day, the brokerage said.

Major negativity came from the technology and communication sector where TRG and SYS dented the index by 136 points, further, profit-taking weighed the UBL, MCB, and MEBL down.

The highest increase was recorded in shares of Gatron Industries, up Rs34.22 to close at Rs524.99/share, followed by Pakistan Tobacco Company, up Rs30 to end at Rs1,100 per share.

Nestle Pakistan fell Rs333.74 to Rs5,356.25/share to become the loss leader of the day, followed by Bata Pakistan, down Rs93.38 to finish at Rs1,746.62/share.

Ahsan Mehanti, an analyst at Arif Habib Corp, said, stocks closed lower over concerns over highly likely State Bank of Pakistan (SBP) monetary policy tightening on Tuesday and a weak rupee.

A surge in NSS (National Savings Schemes) rates, higher government bond yields, likely introduction of minibudget for resumption of IMF programme and frayed Pakistan-US relations contributed to Monday’s losses.

WorldCall Telecom topped the volumes chart with 18.33 million traded shares, followed by Byco Petroleum recording 7.30 million shares.

Some major turnover-makers included Fatima Fertiliser, TRG Pakistan Ltd, Hascol Petrol, United Bank, K-Electric Ltd, TPL Properties, Telecard Limited, and Treet Corp. Turnover in the future contracts decreased to 38.70 million shares from 57.16 million.