If KSE bulls and bears are playing bridge, the latter have nearly all the trump cards in their hands: a fragile security situation, NRO and uncertainty over the fate of its beneficiaries, a pause in monetary softening in the backdrop of inflationary risks stemming from fiscal constraints, absence of non-IMF foreign inflows, rising global commodity prices and of course the expenses on war against militancy.
Perhaps, thats what is keeping foreign investors at bay. NCCPL data shows foreign portfolio inflows dropped 66 percent month-on-month to $12.9 million in November compared to $38.33 million in the month before.
Foreign selling has, in fact, gathered pace of late, with an outflow $10.29 million in the last seven sessions, including the sale of $5.32 million worth of equities in the month so far. And from the looks of it, this selling would continue throughout this month as global investors plough out funds for Christmas.
Ordinarily, when foreigners sell, local investors buy to capitalize on lower price levels. Yet, despite the bullish undertone, pinned on recovery talks, domestic players aren active.
Consequently KSE-100 has been caught in a tight range with the difference between day-high and day-low narrowing to an average 114 points in the last 7 session compared to an average 178 points in November and 210 points in September. Typically, such congestions show the market is trying to find a direction - which can be northwards if the bottoms are rising with the index channeling upwards.
But when it is marked by extremely low volumes with more than few negative developments and the index trending downwards, then its a tell tale sign of trouble. KSE-100s trading volume squeezed to an average 66 million in the seven sessions, compared with an average 102 million in November and 169 million in the month before.
So in short, the outlook for KSE will be determinable by the number and quality of cards the bulls and bears have. For now, the bears have the picture cards and trumps too. Unless the bulls are bluffing, based on the timely arrival of non-IMF foreign flows, which can enable them to play a bad hand well, the movements in stock prices signal a free fall ahead. It can be a long and painful December.
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