Stocks suffer technical correction

A LONG overdue technical correction manifested itself in a bigger way during the last week as both institutional and foreign investors took profits at the inflated levels but only extreme gains were pared off
because of presence of support at the dips.

Most analysts believe the reaction is technical and may not extend for another week as investors, mainly foreign, may not miss the attractive bait of capital gains at this stage.

Although the weekend rally was feeble, the benchmark at one stage hit the high of 12,571.64 and demonstrated in more than one ways that the current run-up was not overdone.

The market after about eight weeks sustained rise, which pushed the benchmark to over 30-month high of 12,600 points, last week showed a fall of 101.63 points at 12,431.91 as leading base shares such as OGDC, Pakistan Oilfields, MCB, PSO, Shell Pakistan Engro Corporation, Dawood Hercules and some others eroded a good part of the accumulated gains.

Leading oil shares, later in the week, assumed the role of market trend setters owing to strong presence of foreign support in them, and the broader market behaved as they liked it to, said a broker.

It finally ended at 12,431.91 points from the previous peak of 12,533.54 and so did its junior partner at 12,134.02 off about 200 points.

But analysts said the reaction was essentially technical as far as the underlying sentiment is concerned it did not indicate that the current run-up is overdone.

The dividend season is around and the current sell- off reflects that fresh covering purchases at the lower levels are now overdue, they said and added that in market parlance, a highly overbought market could encounter selling any time.

Only high-profile shares, mainly in the oil, fertiliser and banking sectors were targeted to realise capital gains at the higher levels, which would ultimately provide the base for fresh covering purchases at lower levels.

The benchmark on Monday, however, confidently! inched up to its next target of 13,000 points as investors were not inclined to take an overview of the bad news from the economic front amid louder talk of fiscal emergency.

The launching of leverage product for the ready section may not be that close but rumour-mongers made it look so, said analyst Ahsan Mehnati. Something positive may, however, be cooking at official level.

The important thing is that investors have money but investment avenues for quick gains are not many in the backdrop of SOS from trade and industry, he said and added the share market is one of the many, which ensures quick return on investment in the bull market.

The index, however, finished the weeks opening session with a fresh sharp rise of 1.18 per cent or 148.40 points at 12,681.94 as investors continued to build-up long positions on those counters where dividend announcements are overdue, notably by fertiliser and leading oil shares.

Apart from Rafhan Maize and Nestle Pakistan, other base shares which posted fresh gains included PSO, Shell Pakistan, National Refinery, OGDC and Pakistan Oilfields.

Colour of the leverage product is already visible in the share business, another leading stock analyst said and added the market managed to sustain its bull-run despite tense law and order situation in the city.

He said reports of higher dividend by some leading companies during the current week also generated a good bit of speculative buying where the announcements are due.

Future contracts: Two-way massive activity again featured the trading on this counter as investors early build-up of long positions on rumours of higher payouts and after mid-week liquidated long positions at higher level followed by negative reports about the size of dividend.

Much of the activity remained confined to Pakistan Oilfield, Nishat Mills, Fauji Fertiliser Bin Qasim and Engro Corporation, which came in for active profit-selling after mid-week but on-balance closing was steady due to active short-covering at th! e dips.M uhammad Aslam