PSX: Respite for investors

Since the start of February, the benchmark KSE-100 index has been range-bound. While a breather was required but no one was expecting the market to get into hibernation mode. The activities on the bourse have been so slow that some traders might even prefer watching paint dry.

The bazaar had its own reasons for this sluggish behaviour. With the panama-gate issue getting dragged on, in-house financing was being choked and the overall valuations were being stretched. Triggers supporting the multiples had to be revisited.

In the midst of this soul searching, the investors had been praying for some positive trigger; and it looks like they have got their wish. Crude oil has bounced back above $50, and the index being oil heavy has made up for the increase in global prices. Stocks like (PSX: POL, PPL) are leading the way.

The government also lifted the ban imposed on new gas connections to industries. This news had a multiplier effect with utility companies like SNGP and SSGC coupled with pipe material provider Crescent Steel (CSAP) attracting interest. Industries such as Glass and Textile also had their valuations bumped as many companies were awaiting new gas connections.

Additionally, the CDC and NCCPL sent out a notice where they have invited brokers and bankers to discuss the potential changes to the in-house financing model. Due to lack of financing options, many retail investors had turned to side-lines. This news brought much needed hope that at least work is being done to resolve this issue.

Lastly, according to market chatter, amnesty scheme news also brought in some positivity as investors took cue from previous amnesty schemes where a good chunk of the money flow found its way into the stock market.

Technically, the KSE-100 index has gathered short term momentum and some upside from current levels can be expected. The volumes need to increase to support the bulls otherwise this rally will be short lived as there will be no confirmation of a trend reversal.