When billions of dollars of investment promises made by Saudi Arabia, and the recovery in January 2019’s current account failed to hype up sentiments at the stock market late last month, brokers attributed the weakness to the delay in the passing of the supplementary finance bill in the National Assembly and Pak-India hostilities.

In last month’s coverage titled ‘PSX: caution back in control?’ (Published Feb 25, 2019), BR Research spelled out why none of these reasons mattered as such. It flagged why the real headache stems from the fiscal side, and the timing and the conditionalities of the IMF programme.

BR Research had the opportunity to chat with several mutual fund actors at the launch of MUFAP’s recent annual report this Monday evening. Mutual funds being one of the biggest sellers in the market lately are an important segment to take the pulse of. And here is what the consensus view was: we are uncertain, which was not exactly an epiphanic response.

But upon further probing it turned out the delay in the IMF programme is indeed the worry on their minds. Strangely though, fiscal side concerns are not. Perhaps market players are acting like ostriches — ignoring the possible consequence of higher defence spending, leading to higher budget deficits, lower PSDP spending amid lower tax collection. Throw in a further interest rate hike, and further expected depreciation of rupee, and we have a recipe for disaster.

The problem is that all these ifs and buts are at least three months away, if not four as some well-connected quarters are now expecting the IMF programme to come to life after budget FY20 is announced. Considering that markets loathe uncertainty more than they dislike negative news, it’s rather strange that most punters expect a range bound behaviour rather than further slide south of 36000 points. Technical analyst at AKD Securities, Qasim Anwar, in fact expects the index at north of 45000 points by June 2019.

Anwar along with a select group of other market players point to rising bottoms amid low trading volumes as a sign that the bears have lost their strength, while hoping that interest rate cycle will start reversing later this calendar year. The whole thing increasingly seems like a front row ticket to a great battle of views, a battle which is clearly not for the weak hearted. (See also BR Research Game of nerves: the plot thickens, January 21, 2019).https://www.brecorder.com/2019/01/21/467582/game-of-nerves-the-plot-thickens/