Stocks Creep Up Amid Volatile Trading at the Pakistan Stock Exchange
Overview of Thursday’s Trading Session
On Thursday, the Pakistan Stock Exchange (PSX) witnessed a volatile but positive trading session, with the KSE-100 index making significant moves. The day started on a high note, as the market surged by over 1,000 points, bolstered by strong macroeconomic indicators. The release of December 2024 Consumer Price Index (CPI) data, which showed a 4.1% inflation rate—the lowest since April 2018—boosted investor confidence and triggered a rally in the early hours of trading.
However, the upbeat momentum faced a slight setback as the day progressed. The market experienced profit-taking in the latter half, resulting in a dip to the intra-day low of 116,857.61. By the end of the session, the index closed with a modest gain of 111.57 points, marking a 0.10% increase and settling at 117,119.66 points.
Key Drivers Behind the Market Movement
Decelerating Inflation and Positive Macroeconomic Indicators
One of the primary drivers behind Thursday’s positive trading was the release of the December 2024 CPI data. With inflation coming in at a subdued 4.1%, the figure indicated a significant deceleration in inflationary pressures. This gave rise to expectations of a potential reduction in the policy rate by the State Bank of Pakistan (SBP) in the near future.
Ahsan Mehanti, the Managing Director of Arif Habib Corp, highlighted that the CPI data, coupled with other macroeconomic signals, were the key catalysts behind the market’s positive movement. These factors included a surge in export revenues, which saw an impressive 10.52% year-on-year increase for the July-December 2024 period, as well as the anticipated projection of $35 billion in remittances for FY25.
Speculation on SBP Policy Rate Cut
Another factor contributing to the market’s bullish sentiment was speculation surrounding a possible rate cut by the SBP. Investors were hopeful that easing inflationary pressures and the government’s macroeconomic stability measures would encourage the SBP to reduce its policy rate, which would likely stimulate further market activity.
Investor Sentiment and Profit-Taking
Despite the optimistic macroeconomic outlook, the market also witnessed profit-taking towards the end of the session. Investors capitalized on recent gains, resulting in mixed sentiment across different sectors. While some stocks maintained upward momentum, others faced selling pressure. This saw the KSE-100 index fluctuate between an intra-day high of 118,367.81 points and an intra-day low of 116,857.61 points.
Sector Performance: Fertilizers and Oil & Gas
Fertilizer Sector: Major Contributors to the Index’s Gain
The fertilizer sector emerged as one of the biggest contributors to the index’s gains during Thursday’s session. Engro Fertilisers and Engro Corporation were among the top-performing stocks, gaining 5.92% and 6.02%, respectively. Another notable performer was Millat Tractors, which surged by 10%.
A major highlight in the fertilizer sector was the sharp 58% year-on-year increase in urea sales for December 2024. Urea sales hit a record high of 991,000 tons, marking the highest sales figures since June 2020. This growth was primarily driven by increased demand for fertilizers, which boosted investor confidence in the sector.
Oil and Gas Sector: A Decline in Oil Prices
In contrast, the oil and gas sector faced some setbacks during Thursday’s trading. Key stocks in the sector, such as Oil and Gas Development Company (-2.34%), Pakistan Petroleum (-2.41%), and Mari Petroleum (-1.84%), were among the biggest index drags. This decline can be attributed to falling oil prices in the international market and investor caution in the sector.
Oil Marketing Companies: Strong Performance in December
On a positive note, oil marketing companies reported a solid performance in terms of petroleum sales during December 2024. Sales of oil marketing companies surged to 1.28 million tons, representing a 3% year-on-year growth. Diesel sales showed a particularly strong increase, rising by 12% compared to the previous year.
Market Volatility and Trading Volume
Trading Volume and Investor Activity
Thursday’s trading session saw increased activity, with total trading volumes reaching 1.04 billion shares, up from 956.3 million on Wednesday. This surge in volume indicated heightened investor participation, particularly in stocks of companies with strong macroeconomic fundamentals.
Among the most actively traded stocks were Fauji Foods, which led the volume chart with 89.5 million shares traded. The stock gained Rs0.95 to close at Rs19.24. Other actively traded stocks included WorldCall Telecom, which saw 72 million shares changing hands, and Telecard Limited, with 61.1 million shares traded.
Despite the overall positive session, foreign investors were net sellers, offloading shares worth Rs128.4 million.
Volatility in the Market
The day’s trading was marked by significant volatility, with the KSE-100 index fluctuating between an intra-day high of 1,359 points and a low of 150 points. This indicates that investor sentiment was mixed, with some sectors experiencing more pronounced volatility than others.
Key Takeaways and Outlook
While the market ended the day with a modest gain, the session highlighted the ongoing volatility in the PSX. Positive macroeconomic indicators, including the drop in CPI inflation and the potential for a rate cut by the SBP, provided optimism to investors. However, profit-taking and sector-specific declines led to fluctuations in the index. Moving forward, investors are likely to remain cautious, keeping a close eye on any further policy announcements from the SBP and upcoming earnings reports.
FAQs
1. What caused the market to surge on Thursday?
The market surged primarily due to the release of December 2024 CPI data, which showed a significant reduction in inflation to 4.1%, signaling easing inflationary pressures. Additionally, strong macroeconomic factors, such as rising export revenues and projections of higher remittances, contributed to positive investor sentiment.
2. Why did the market experience a dip later in the session?
Profit-taking in the latter part of the session led to a dip in the market. Investors capitalized on the recent gains, which resulted in a sell-off and fluctuations in stock prices across various sectors.
3. What were the top-performing sectors on Thursday?
The fertilizer sector, particularly Engro Fertilisers and Engro Corporation, was the top performer on Thursday. These stocks posted strong gains, with urea sales hitting a record high in December 2024. In contrast, the oil and gas sector saw declines in key stocks such as Oil and Gas Development Company and Pakistan Petroleum.
4. What is the outlook for the Pakistan Stock Exchange?
The outlook for the PSX remains cautiously optimistic, driven by positive macroeconomic signals. However, market volatility is likely to persist, with investors closely monitoring policy developments from the SBP and sector-specific performance.
5. How did foreign investors react to the market on Thursday?
Foreign investors were net sellers on Thursday, offloading shares worth Rs128.4 million. This indicates some caution on the part of foreign investors amid the ongoing market volatility.
