Market invites bears after capping mechanism reversion (15072208)

LEADER REPORT
KARACHI: Reverted capping mechanism brought a crash session with improved volumes of 70 million shares. The panicked that gripped the investors after prevention of exit from two weeks was expected to settle down with the normal capping mechanism, which was not seen as such. The market opened on a negative note and approached its lower band and maintained closing with the trend of the previous trading session, while the only difference was that majority of the scrips closed hitting their five percent lower circuit breakers. The index closed down by 519 points at 11,177 points, decline of 4.5 percent.
The depreciating rupee is stabilising after the strict regulation of the SBP. Saudi Arabia has provided with a deferred oil payment facility to Pakistan, this will prove a substantial support to the macro economic indicators of the country. The foreign investment outflow continues as massive outflow of USD 39 million in the foreign investors portfolio investment has been witnessed in July. Monday's declines can be attributable to the foreign selling.
The strong fundamentals due the positive expectation FY08 financial result and the high oil prices, which achieved its all time high level after declining in the past few days, could not even support the oil sector. While some resistance was shown from the sector in the start, but later on followed the market trend and majority scrips closed hitting their lower circuit breakers.
Cement prices rose to its all time high level of around Rs.400 per bag. The hike in cement prices is due to the soaring coal prices which contribute to the major part of the cost of production.
The short term outlook of the market is anticipated to be bearish, while the volumes are expected to improve as the capping mechanism has been revised. The prevention from exit in the previous sessions will make the investors square their holdings, as they will be provided with the opportunity of exit. The Equity Market Opportunity Fund which will be active in the coming days is expected to bring recovery. Investors are recommended to adopt wait and see strategy till the end of the bearish spell, while bourse are presented with attractive valuations.