Pakistan stocks to stay bullish on anticipated interest rate cut

Pakistan stocks are expected to stay positive, especially with the upcoming monetary policy committee meeting where a rate cut is anticipated.

Despite the recent rally, stock valuations remain attractive. Analysts suggest focusing on sectors that will benefit from monetary easing and structural reforms, particularly high-dividend-yield stocks as yields align with fixed-income returns.

The ongoing results season is also drawing investor interest, with certain stocks expected to remain in the spotlight due to strong financial performance.

The Pakistan Stock Exchange had an outstanding week ending October 25, 2024, with the KSE-100 index crossing the 90,000 mark intraday on Friday.

This surge was mainly due to expectations of a policy rate cut in the upcoming MPC meeting on November 4, 2024, boosting investor confidence.

The KSE-100 index closed at 89,994 points, a significant rise of 4,744 points or 5.6%.

Foreign selling continued this week, totaling USD 16.4 million, compared to a net sell of USD 11.6 million last week.

Indian Stocks

Indian shares experienced their longest weekly losing streak since August 2023, with a broad selloff caused by foreign investors pulling out and poor corporate earnings.

Every sector recorded weekly losses. Disappointing earnings from Indian companies, particularly in consumption-linked sectors and financials, worsened the situation.

The BSE index has fallen 8%, influenced by 19 consecutive sessions of foreign outflows, as investors shift funds to China due to its stimulus measures and cheaper valuations.

This month is shaping up to be the worst for Indian benchmarks since March 2020, when a nationwide COVID-19 lockdown was announced.

Currency

Pakistani rupee weakened marginally against the US dollar, depreciating 0.02% in the inter-bank market to PKR 277.64 during the week.

The USD Index (DXY), which measures the dollar against a range of currencies, is consolidating after pulling back from its highest point since July 30, influenced by softer US Treasury bond yields.

Additionally, signs of stability in equity markets are diminishing the appeal of the safe-haven dollar. However, increasing consensus around the Federal Reserve's likelihood of implementing smaller rate cuts, combined with concerns over deficit spending following the US presidential election, is providing support for US bond yields.