The market fell off a cliff during the week after panic ensued following the SBP’s decision to hike the policy rate and the rupee devalued to new lows. This led to the market closing 1,934 points lower W/W at 38,562 points. The heightened volatility also kept investors on the sidelines after the main board and the broader market displayed average volumes of 108.77mn and 163.32mn shares respectively.
Declining and uncertain economic indicators have kept foreign investors from the bourse as well, who have been net sellers of USD101.67mn since the start of November, USD1.72mn of which were added during the current week. Among the local investors, mutual funds contributed the most to the downwards movement in the market after turning out as net sellers of USD26.71mn.
International oil prices pushed upwards at the start of the week but could not sustain it after OPEC decided to make its supply-cut decision dependent on Russia. This led to WTI closing at USD51/bbl and Brent at USD60/bbl. Taking cues from this, local E&P scrips closed in red during the week.
The interest rate hike and currency devaluation acted as a double whammy for the cement industry, which has already been severely affected by lower margins due to higher fuel costs. Cement turned out as one of the worst performing sectors of the week while PIOC, CHCC and MLCF were all among the major losers. Other sectors affected by the currency devaluation were automobiles, fertilizer and pharmaceuticals.
The steel sector also remained under pressure during the week due to the aforementioned PKR depreciation, which coupled with news of steel being dumped from China and Russia led to a selling spree in it. OMCs freefell during the week due to the GoP’s decision to reduce petroleum product prices, with the falling rupee further jolting the sector.
The recent currency rate decline and policy rate hike has left the market in tatters, and we expect it to remain shoddy in the near-term, especially due to developments on the political front. We maintain our recommendation of cherry-picking from export-oriented sectors and blue-chip names at attractive valuations.