Institutional buying stires some movement at KSE (10072008)

KARACHI: Finally some activity was witnessed at KSE on Wednesday on the back of the decision taken by SECP and KSE to setup a support fund for the purpose to inject liquidity in the market. The market opened on a bearish note, but was supported by institutional buying particularly in the oil sector. The index remained in the negative zone most of the time. Later, when it approached the positive zone, the selling pressure again diverted the direction downwards. The index closed down by 17 points at 11,796 points, slightly improved volumes were witnessed comparing with the previous inactive sessions of 52 million shares.
The SBP took urgent measures to maintain rupee at a sustainable level. The measures are short term to restrict imports only to important items. The SBP has suspended the facility of forward contract; the oil payment will only be made through the SBP and the foreign exchange transaction timings have been reduced. These measures supported the rupee, thus appreciation was seen and PKR closed at 72 against USD.
The surging international oil price took a downturn and was seen at $136 per barrel. In the recent G8 summit certain measures were taken to control the basic commodities and food prices due to the rising international oil prices.
Oil sector was the major performer of Wednesday's session. E&P sector was seen with high volumes, as OGDC was the volume leader. On the back of expectation of growth in earning and the hike in oil prices, as E&P is a beneficiary of rising oil prices.
These measures are short term and will not be able to provide support to the market in the long term. The regulators will have to set the market free to decide its own direction. The depreciation in rupee has increased the chances of a higher increase in the discount rate in the coming Monterey policy which will cast a negative impact on the market. Investors are advised to adopt wait and see strategy, while they can take position in fundamentally strong sectors such as E&P, OMC and Fertilizer.