Buying at Dips Helps Index Snap Bearish Run

January 11, 2025 Mahi Bukhari

Introduction: The Stock Market’s Performance Amidst Volatility

The stock market ended its four-day bearish streak with a partial recovery on Friday, driven by institutional buying during dips. This article delves into the intricate movements of the KSE-100 index, highlighting key contributors to the market’s revival and discussing the underlying factors influencing investor behavior.

H1: Volatility Defines the Day

H2: Market Opens Negative

In line with the preceding sessions, the market opened with bearish momentum, reflecting negative investor sentiment. The KSE-100 index initially plunged by 625 points, marking an intraday low of 0.55%. Concerns over global economic uncertainties and weak domestic cues contributed to the early sell-off.

H2: Institutional Buying Reverses the Trend

The narrative changed during the second half as institutional buyers stepped in, capitalizing on lower stock prices. This strategic buying resulted in the index recovering 609.03 points, ending the day at 113,247—a 0.54% day-on-day gain.

H1: Key Drivers Behind the Market Recovery

H2: Blue-Chip Stocks Lead the Recovery

Certain blue-chip stocks, particularly in the oil and cement sectors, played a pivotal role in the recovery. The surge in global crude oil prices and declining government bond yields added confidence to these sectors.

H2: Rising Remittances Boost Sentiment

The market also received support from a positive macroeconomic indicator: a 29.3% year-on-year increase in remittances, totaling $3.1 billion in December 2024. This data uplifted investor confidence and contributed to the bullish close.

H1: Sector-Wise Contributions to the Index

H2: Positive Contributors

The major contributors to the positive market close included:

Oil and Gas Development Company (OGDC)
Pakistan Petroleum Limited (PPL)
Bank Al-Habib (BAH)
Habib Metropolitan Bank
DG Khan Cement (DGKC)
Fauji Cement Company (FCCL)

Together, these stocks added 773 points to the index.

H2: Negative Contributors

Despite the recovery, some stocks witnessed declines:

Engro Holdings
Hub Power
United Bank Limited (UBL)
Habib Bank Limited (HBL)
Meezan Bank Limited

These stocks collectively lost 216 points, reflecting profit-taking activity in specific sectors.

H1: Trading Volume and Value Analysis

H2: Decline in Trading Volume

The trading volume dropped by 28.09%, reaching 499.84 million shares, indicating cautious trading behavior among investors.

H2: Increase in Traded Value

Interestingly, the traded value increased by 2.18%, totaling Rs24.82 billion. This indicates that despite lower volumes, higher-value transactions were executed, primarily in high-cap stocks.

H1: Top Performing Stocks

H2: Significant Price Gains

The stocks that registered the most notable price increases included:

Nestle Pakistan (+Rs351.39)
Unilever Foods (+Rs89.00)
Hallmark Company (+Rs66.35)
Mehmood Textile (+Rs53.69)
Pakistan Engineering Company (+Rs34.07)

These stocks showcased robust performance, reflecting investor confidence in their long-term prospects.

H1: Underperforming Stocks

H2: Notable Price Declines

Stocks experiencing significant price drops were:

PIA Holding Co (-Rs67.82)
Service Industries (-Rs28.58)
Abbott Laboratories (-Rs28.16)
JDW Sugar Mills (-Rs27.36)
Indus Motor Company (-Rs24.52)

The declines were primarily attributed to profit-taking and sector-specific challenges.

H1: Investor Sentiment and Market Trends

H2: Mixed Sentiments Dominate the Session

Ali Najib, Head of Sales at Insight Securities, observed that the market displayed directionless behavior during the initial phase. The absence of strong positive triggers led to a tug-of-war between profit-taking and value hunting.

H2: Fresh Flows in Energy Stocks

Towards the session’s close, fresh inflows in energy stocks, supported by rising global oil prices, provided the much-needed push for the market’s recovery.

FAQs

H3: 1. What caused the early bearish trend in the market?

The early bearish trend was driven by weak investor sentiment, global economic uncertainties, and a lack of positive domestic triggers.

H3: 2. Which sectors contributed the most to the market’s recovery?

The oil and cement sectors were the primary contributors to the market’s recovery, supported by rising global crude oil prices and declining bond yields.

H3: 3. How did remittances impact the market?

The market received a boost from remittances increasing by 29.3% year-on-year, which improved macroeconomic sentiment and investor confidence.

H3: 4. Why did trading volume decline despite a positive close?

The decline in trading volume, despite a positive close, reflects cautious trading behavior among investors amid market volatility.

H3: 5. What were the top-performing stocks of the day?

Top-performing stocks included Nestle Pakistan, Unilever Foods, and Hallmark Company, which showed significant price gains.