The equity market has had a volatile start to the new-year. Although the bench-mark KSE-100 index went up about 2 percent in January, the ride was a bumpy one. The psychological and landmark level of 50,000 points was crossed but the conviction to remain above this level is currently not there. Lack of conviction has led to confusion, which is never a good thing for the markets.
During January, the trend of foreign portfolio investment outflow continued while mutual funds backed by liquidity and inflows continued to support the market and remained net buyers. The banks on the other hand were net-sellers.
According to data provided by MUFAP (Mutual Funds Association of Pakistan), conventional equity funds gave average return of 3.5 percent compared to 1.98 percent return of KSE-100 index. The top performing fund in this category was JS Growth Fund with a return of 7.16 percent followed by JS Large Cap Fund with a return of 6.12 percent.
Speaking to BR Research Mr. AAH Soomro, the fund manager of the top two funds, mentioned that overweight position in IGI Insurance (PSX: IGIIL) and Pakistan State Oil (PSX: PSO) and under-weight position in oil exploration companies led to the out-performance of the funds under his management.
In the shariah compliant equity funds category, the average return was 2.53 percent. MCB Pakistan Islamic Stock Fund was the top performing fund in this category with a return of 4.03 percent. Muhammad Asim, CIO of MCB-Arif Habib Savings & Investments Limited, informed BR Research that the fund had a good balance of growth and anchor stocks. Outperformance of the fund was due to positions in stocks such as International Steels (PSX: ISL), Sui Northern Gas Pipeline (PSX: SNGP) and Hub Power (PSX: HUBC).
Looking forward, the general consensus is that the equity market needs a breather and consolidation should happen around 50,000 points level. Earnings season is under-way which will further give clarity on whether the growth projections tabulated by various analysts materialize or not.
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