Stocks continued upward trajectory for second consecutive day as mutual funds, banks kick in

KARACHI: The stock market soared on Thursday, continuing its rally from the previous day, with the benchmark KSE-100 index closing at 42,480 to register a rise of over 1,080 points (2.54 per cent).

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Combined with yesterday’s rally, the market has risen 4.28pc or 1,745 points since the start of the new year (YTD).

Yesterday, the market had closed at 41,400, rising 665 points (an increase of 1.64pc) in what analysts said was a result of the “new-year euphoria” coupled with positive macroeconomic indicators for the year ahead.

In the past week, on days when the market has risen, the gains have usually been erased by day-end as investors turned to profit-taking – a trend that was broken yesterday after the market continued rising till the closing bell. Analysts said investor optimism was further buoyed by macro indicators such as inflation, which came in at 12.63pc for Nov ’19, meeting the market’s expectations.

A fund manager at an asset-management company said the most probable reason for today’s rally was participation of mutual funds as underweighted funds took positions for the year ahead, encouraged by the optimism seen in the past two days.

He said recently there was a recomposition of the KMI index with changes in weights assigned to major companies such as the Pakistan State Oil (PSO), Dawood Hercules (DH), Hub Power Company Limited (HUBC) and Lucky Cement (LUCK) among others.

“With the recent recomposition, many mutual funds that had not previously participated are taking fresh positions, which contributed to today’s surge.”

Ali Asghar Poonawala, Deputy Head of Research at AKD Securities, was of the opinion that today’s rally was bolstered by news of tax relaxations on inter-corporate dividend, announced recently.

“There is also a strong expectation on the street that interest rate will be lowered this year, which is bound to boost investors,” he added. Poonawala said bank treasuries were “very active” today, taking their positions in anticipation of rate cuts.

On the whole, investor activity remained high throughout the day, with around 283 million shared traded, an almost 19pc increase over the 238m shares that exchanged hands a day ago.

Analysts said the political situation of the country had also added to today’s rally after news emerged that the government and the main opposition party, PML-N, had come to an agreement over amendments to the Army Act, which will be put up for vote in Parliament soon.

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