Stocks lower on inflation amid ‘tough budget’

Shares fell on Wednesday after concerns over inflation, which hit a 28-month high in May, sparked a selling frenzy amid market buzz the next budget is going to be punitive, traders said.

Profit-taking remained the order of the day, leading the market to snap a five-fight winning streak in topsy-turvy trading.

The benchmark Pakistan Stock Exchange (PSX) KSE 100-share Index closed down 322.10 points or 0.75% at 42,756.04 points from 43,078.14 points recorded in the last session . The highest index of the day remained at 43,149.17 points while the lowest level of the day was recorded at 42,718.73 points.

“The market has been under pressure as investors brace for adverse fiscal measures for the next fiscal year,” Arif Habib Ltd (AHL) said in a post-trade note.

According to the brokerage report, it was mainly a new wave of concerns over runaway inflation that forced market participants to distance themselves from taking new positions.

“Although motherboard business remained lackluster, third-tier stocks saw strong trading volume,” the AHL report said.

The big losers are electricity (-67.8 points), banks (-65.7 points), cement (-55.2 points), technology (-41.1 points) and exploration and production energy (-32.4 points).

The KSE-30 equity index also recorded a loss of 157.93 points or 0.96% to end at 16,295.55 points.

For obvious reasons, volumes were down 91 million shares to 194.398 million shares from 285.348 million shares. The trade value fell to 5.349 billion rupees from 7.388 billion rupees.

Turnover in futures rose to 62.311 million shares from 58.06 million shares.

Market capital shrank to 7.113 trillion rupees from 7.136 trillion rupees. Of 334 companies active in the session, 98 closed in the green, 207 in the red while 29 remained unchanged.

Topline Securities said the expectation of higher inflation across the board, coupled with the removal of fuel and energy subsidies in the upcoming budget, due June 10, 2022, has muted trading,” did he declare.

The main laggards were HUBC, UBL and FFC, while EFERT and MARI closed higher.

Rafhan Maize stole the show rising from Rs 330 to Rs 10,030/share, followed by Nestlé Pakistan, up from Rs 70 to Rs 5,780 per share.

Bata Pakistan lost most of its shine losing Rs49.99 to Rs1,850/share, followed by Ismail Industries which fell from Rs33.74 to Rs475.11/share.

Arif Habib Corp senior analyst Ahsan Mehanti said stocks fell across the board after CPI-based inflation hit 13.7% year-on-year for May 2022, while a Delay in restoring the IMF program also rattled sentiment.

Expectations that the government could raise energy prices further to bring the IMF loan online added to the selling pressure, he said.

Silk Bank Ltd was the most traded stock. It recorded a turnover of 24.628 million shares to close down one paisa at Rs1.49 per share. Next was Unity Foods Ltd with 14.095 million shares. It lost 47 paisas to close at Rs22.30 per share.

Other volume builders include Ghani Global Holdings, Pakistan Refinery, Fauji Foods Ltd XD, TPL Properties, Cnergyico PK, Telecard Limited, WorldCall Telecom and Pakistan Reinsurance.

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