PSX: jumping the gun

Investors in any industry or country do not appreciate uncertainty. Lack of clarity on political issues and policies that go along with it makes number crunching for new and existing ventures extremely difficult. Whenever investors are faced with such a scenario, they are likely to hold-off any big decisions and prefer waiting on the side-lines.

Similar scenario has been witnessed with investors at the Pakistan Stock Exchange where after a great bull-run fueled by optimism was tamed down by political uncertainty. The panama issue has dragged on far too long for the investors and at the slightest signal of clarity on the issue, the bulls have woken up.

The KSE-100 index on Wednesday had one of the most volatile days in recent years. At the start of the day weak holders had lined up with sell orders during pre-open of the market. The index opened with a gap of almost 400 points towards the downside and in a few minutes went down 800 points on very thin volume.

Local institutions which had been waiting on the side-lines jumped in at this point and took out the bears. The volumes that were last witnessed during end of January, started coming back into the bourse. The focus of the funds was towards blue-chip stocks and most of them saw healthy activity throughout the day.

Index names such as OGDC, ENGRO, PPL, FCCL and UBL added the most points and aided the KSE-100 recover back and add another 800 plus points, taking the total swing for the day to 1,667 points. Total volume increased by 70 percent while value traded almost doubled compared to the previous trading sessions.

Taking cue from the price action in the market, it seems that investors have started to price in their desired verdict. If anything other than what is expected by the investors comes out on Thursday, then we can see the momentum reversing as well.

Technically, the KSE-100 index is still not out of the woods and needs to maintain this momentum to reverse the downtrend. Series of resistance levels lay ahead which would need significant volumes to break down.