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BR Research

Will Moulana’s rally clip PSX’s?

  At the weekend before last, many capital market players thought the end is nigh for the rally that began a few we
Updated 04 Nov 2019

 At the weekend before last, many capital market players thought the end is nigh for the rally that began a few weeks earlier after the KSE-100 had hit its lows around 28000 levels. The reason: Moulana’s March and the ensuing political uncertainty. Turns out the week that followed didn’t respond to those fears and the benchmark stock index closed on a high note.

PM Khan’s decision to defer the axle load policy for a year, the calling off of the strike by traders, amid ducking the FATF blacklist have been some of the key drivers. Granted that all these are akin to kicking the can down the road, but all know well that market players don’t think that ahead. Carpe diem!

A nod of approval from the IMF has also given confidence to the market. So did better-than-expected collections by the Federal Board of Revenue. But perhaps the most important trigger was a noticeable fall in bond yields.

Much still depends on politics. From what it appears, the situation is too fluid at the moment and a look at political chatter suggests that all extremes are being talked about. It’s hardly a time to form a concrete consensus view on the march.

In times like this, uncertainty usually erodes sentiments, leading to volatility if not weakness. But then again, there has been enough blood on the trading floor already; further weakness in stock prices will hardly dampen sentiments. The ride from around 28000 points has helped the market gain confidence; fragile but confidence, nevertheless. Recall that the market has also dispelled fears stemming from India’s belligerence in Kashmir.

This doesn’t necessarily mean the bulls will continue to rally henceforth. Afterall, a key resistance lies ahead – just 400 points away from current levels. Neither the economy is beefy enough; nor politics can be ignored entirely to assume that the KSE-100 would rally north. Rangebound behaviour is likely for now. But if index does jump above 34700 points with strong momentum, then either someone knows something that most others don’t. Or, someone has been taking steroid injections.