Pakistan stock market likely to see volatile week

Pakistan stocks are expected to experience volatility in the initial sessions of the upcoming week, but would consolidate towards the latter part of the week given key economic indicators showing signs of stabilization.

Ali Nawaz, CEO of Chase Securities, mentioned that the market is expected to consolidate next week following the healthy correction recorded last week.

He anticipates increased accumulation in January as the corporate results season begins and the central bank announced its monetary policy , potentially prompting fresh buying in the auto and cement sectors.

The outgoing week, which ended December 20, 2024, began on a positive note following another interest rate cut and current account surplus.

However, two sessions recorded hefty declines, with the index losing 3,700 points and 4,800 points due to mutual funds selling.

The PSX closed at 109,513 points, a decline of 4,789 points, or 4.19%, compared to the previous week.

Shahrayar Butt, Portfolio Manager at Darson Securities, stated that the market is expected to remain range-bound next week due to rollover settlements.

He projected the benchmark index to fluctuate between the 106,000 and 110,000 points levels. "The market activity in the coming week is expected to be concentrated in the oil and gas, banking, and pharmaceutical sectors," Butt noted.

Salman Ahmad Naqvi, head of institutional sales at Aba Ali Habib, expects some adjustments due to rollovers but generally foresees less volatility, with the market moving towards stability.

He highlighted that oil marketing companies and the refinery sector could attract buying, while the banking sector is set to perform as results start coming in next month.

Naqvi emphasized that the recent interest rate cuts have provided much-needed leverage to the cement sector.

A.A.H. Soomro an independent economic and investment analyst said that uptick is likely to continue next week as the market recently saw healthy correction of 10,000 points or more than 10%.

The market saw recovery which to continue as observers believe that December inflation numbers will be under 5% to help buying spree.

Arsalan said as banks are bit dormant but there has been a possibility a year end allocation from this sector to come to the market.

"Investment focus is expected to center on cyclical stocks, with new buying interest likely to emerge in the banking sector. Meanwhile, exploration and production (E&P) and other oil stocks have now reached maturity."

An analyst from Arif Habib noted that many stocks are now trading at attractive valuations, likely enticing investors. The KSE-100 is currently trading at a price-to-earnings ratio of 5.9x for 2025, compared to its 10-year average of 8.2x, offering a dividend yield of approximately 8.1%, compared to its 10-year average of 6.5%.

Despite a net sell of $0.9 million in foreigner selling during the outgoing week, local buying was reported by individuals amounting to $25.8 million and banks/DFIs at $10.5 million. Average trading volumes were down 19.1% from the previous week, while the average value traded increased by 10.2% to $218 million.

Looking ahead, an analyst from Spectrum Securities said the stock market might experience more turbulence and volatility due to futures contract rollover and potential downward pressure. Sudden outflows of money from equity funds triggered selling pressure in the broader market, suggesting that mutual funds inflows may not be strong next week.