Overall, the KSE-100 index ended the week down by 105 points or 0.14%WoW, closing at 75,878 points on May 31, 2024.
Uncertainty surrounding the upcoming budget fueled volatility and profit-taking. With just a week remaining before the budget announcement, concerns have risen over the IMF’s high tax proposals.
Reports suggest abolishing all sales tax exemptions, except for some essential food items, and increasing the standard GST from 18% to 19%.
The budget announcement is expected to coincide with the upcoming Monetary Policy Committee (MPC) meeting, potentially causing delays as Prime Minister Shahbaz Sharif will be on an official visit to China.
May 2024 CPI inflation is projected to be 12.8% YoY. As the inflation outlook eases, the cut-off yields in the latest T-Bills auction dropped by 60bps for 3-month papers. Similarly, secondary market yields for 3-month papers fell by 118bps to 20.44%. The declining yields indicate a potential coupon rate cut in the upcoming MPC, which brought some positivity to the market.
However, with the budget’s impact still uncertain, an imminent interest rate cut in the upcoming MPC seems unlikely.
With an overall volatility in market, participation also decreased by 8.5%WoW, with the average daily traded volume falling to 511 million shares from 558 million shares a week ago.
On the currency front, PKR depreciated by 0.04%WoW to close at PKR278.33/US$.
Other major news flows during the week included: FBR announced plan to collect PKR1.296 trillion through duties, 2) Country borrowed US$7.142 billion during Jul-Apr period, and 3) Credit to private sector declined 39.7%YoY.
Top performing sectors were: Inv. Banks/ securities, Leather & Tanneries, Engineering were amongst the top performers, while laggards included: Transport, Woollen, and Property.
Flow wise, major net selling was recorded by Mutual Funds with a net sell of US$8.9 million. Insurance companies absorbed most of the selling with a net buy of US$13.1 million.
Top performing scrips of the week were: MUGHAL, FABL, FCCL, SYS, and SCBPL, while the laggards included: SHEL, PSX, BNWM, GLAXO, and YOUW.
Market performance is expected to hinge on the upcoming Federal Budget 2025, with the next MPC meeting also remaining in the spotlight.
Though, the possibility of a coupon rate cut is slim, however, any cut would likely boost positivity, especially in the cyclical sector.
Following the budget approval, the next IMF program will take center stage and become a key market trigger in the near term.
