The local stock market displayed a mixture of trends over the past week, influenced by various economic developments. Market sentiment was initially dampened by the consensus expectation of a policy rate hike, but the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) ultimately maintained the policy rate at 22%. Additionally, Pakistan’s current account deficit in August 2023 contracted by 79% year-on-year, totaling USD 160 million compared to USD 774 million in the same period last year. Furthermore, foreign direct investment (FDI) inflows for the first two months of FY24 increased to USD 234 million, up from USD 201 million in the corresponding period of the previous year.

In the previous week, SBP’s reserves decreased by USD 140 million, reaching a total of USD 7.6 billion. The Pakistani Rupee (PKR) closed against the US Dollar (USD) at 296.85, marking a gain of PKR 6.1 or 2.05% week-on-week. Overall, the market concluded at 45,754 points, reflecting a decline of 260 points or 0.6% week-on-week.

Negative contributions by sector were led by Commercial Banks (225 points), Fertilizer (100 points), Oil & Gas Exploration Companies (65 points), Food & Personal Care Products (42 points), and Technology & Communication (41 points). In contrast, the sectors that contributed positively were Cement (116 points) and Investment Banks / Investment Companies / Securities Companies (63 points).

Among individual stocks, negative contributions came from MCB (77 points), FFC (51 points), ENGRO (50 points), HBL (41 points), and MEBL (35 points). Meanwhile, positive contributions came from DAWH (66 points), LUCK (56 points), HUBC (48 points), PSEL (39 points), and PIOC (18 points).

Foreign selling was observed during the week, amounting to USD 9.7 million, compared to a net buy of USD 0.6 million in the previous week. Notable selling occurred in Commercial Banks (USD 5.3 million) and Cement (USD 2.2 million). On the domestic front, buying was reported by Insurance Companies (USD 7.9 million), followed by Other Organizations (USD 4.0 million).

Average trading volumes increased by 10% week-on-week to reach 161 million shares, while the average traded value rose by 21% week-on-week to USD 21 million.

Chart analysis suggests that the index may find initial support near 45,500 points. A breach of this support level could lead to further weakness towards 45,000 and 44,700 points. Conversely, the index may face resistance around 46,000 points initially, followed by potential resistance near 46,500 and 46,900 points. It is advisable to accumulate positions during periods of weakness and approach trading with caution.

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