Relief rally: PSX cheers Supreme Court's verdict, gains 1.5%

• Market players cheer SC verdict as they believe uncertainty is the thief of all joy when it comes to equities.
• KSE-100 index surges 657.75 points to close at 44,444.58.
• Market also remained unaffected even after sudden increase in interest rate by the SBP.

KARACHI: Despite a week marred by high-profile developments from political unrest to the Supreme Court’s verdict, the KSE-100 index managed to close the last day of the trading week on a positive note.

The market witnessed a relief rally on Friday as the benchmark KSE-100 index once again breached the 44,000-point mark.

Market players believe uncertainty is the thief of all joy when it comes to equities; however, the sentiment driver for the market will be immediate policy formation by the new government.

Today's rise comes after panic selling recorded during the week — brought on about by fears of a political and constitutional crisis in the country.

Read more: Supreme Court verdict snaps rupee's record-breaking downward streak against US dollar

The investors cheered Supreme Court’s order to restore the National Assembly after it declared the government's decision to dissolve the assembly and NA Deputy Speaker Qasim Suri's ruling against the Constitution.

This is the reason why the market remained unaffected even after the sudden increase in interest rate by the State Bank of Pakistan (SBP).

In the biggest hike in years, the SBP had raised its policy rate by 250 basis points to 12.25% in an emergency meeting on Thursday and said in a statement that more steps like an increase in export refinancing rates and cash margin on imports would be announced soon.

Today, the benchmark KSE-100 index surged 657.75 points, or 1.50%, to close at 44,444.58 points.

A report from Arif Habib Limited in its post-market commentary noted that the PSX witnessed a bullish momentum today due to prolong awaited decision from the Supreme Court which created clarity among investors.

Read more: PSX's Sahulat Account simplifies access of investors to stock market

“Moreover, appreciation of Pakistani rupee against the US Dollar was even a big relief to investors,” it stated, adding that in the first trading hour, a rally was witnessed in the Banking, exploration and production sector and refinery sectors.

Meanwhile, the steel sector remained under pressure due to the recent hike in interest rates. In the last trading hour, buying activity was observed across the board.

Sectors contributing to the performance included banks (+328.1 points), exploration and production (+80.5 points), cement (+52.1 points), technology (+33.6 points) and fertiliser (+30.5 points).

Shares of 325 companies were traded during the session. At the close of trading, 235 scrips closed in the green, 72 in the red, and 18 remained unchanged.

Read more: State Bank reserves fall to lowest level since June 2020

Overall trading volumes soared to 227.88 million shares compared with Thursday’s tally of 141.01 million. The value of shares traded during the day was Rs6.78 billion.

Telecard Limited was the volume leader with 19.72 million shares traded, gaining Rs0.65 to close at Rs15.10. It was followed by Ghani Global Holdings Limited with 17.71 million shares traded, gaining Rs1.11 to close at Rs17.61 and Treet Corporation with 16.87 million shares traded, gaining Rs1.67 to close at Rs34.18.

Market strategy going forward

Arif Habib Limited in its market strategy said: “We traced back market performance from 2013 to date and observed that every single time the index dipped by nearly 10% or above, the market multiple remained much higher as compared to the current multiple.”

Some key events include:

• Outbreak of COVID-19 in early 2020 (PER of 7.2x)
• Pakistan-India Border tension in early 2019 (PER of 8.1x)
• Last interest rate hike and Pakistani rupee depreciation during the end of 2018 (PER of 8.8x)

“Whereas the market is currently trading at a trailing PER of 4.6x, whereby we do not foresee any major downside in the index,” it noted.