Karachi: The stock market experienced a notable uptick this week, driven by ongoing diplomatic negotiations to address the Middle East conflict and a decrease in global oil prices. Furthermore, the results of the US midterm elections, which saw Democrats securing control of both houses of Congress, have sparked optimism for reduced geopolitical tensions and potential shifts in interest rates.
According to AKD Securities Limited, diplomatic talks between the US and Iran, mediated by Qatar, coincided with a decline in Brent crude prices by 15.9% to $98.8 per barrel. This contributed to the benchmark KSE100 Index's gain of 7,477 points, marking a 4.5% increase to close at 173,887 points on Friday. The average daily trading volume was reported at 1,021 million shares, reflecting a 7% decline from the previous week.
On the economic front, Consumer Price Index (CPI) inflation eased to 9.6% year-on-year in October, with a four-month fiscal year average of 10.1% compared to 4.7% in the same period last year. The government successfully raised PKR 393 billion through the latest Pakistan Investment Bond (PIB) auction, surpassing the target of PKR 350 billion. Cut-off yields for the three and five-year tenors decreased by 11 and 10 basis points, respectively, while remaining unchanged for the two and ten-year tenors. The State Bank of Pakistan's foreign exchange reserves increased by $40 million to $21.6 billion, providing an import cover of three months.
Domestically, petrol and high-speed diesel prices fell by PKR 25.3 per liter and PKR 18.4 per liter, respectively, translating to decreases of 6.7% and 4.6% week-on-week. In the sectoral analysis, cement offtakes rose by 0.4% year-on-year to 4.8 million tons in October, supported by a recovery in construction activity despite a decline in exports due to the Afghan border closure. Oil marketing company offtakes increased by 4% year-on-year to 1.6 million tons, driven by higher furnace oil sales amid disruptions in re-gasified liquefied natural gas supply.
Looking ahead, market analysts anticipate further improvements bolstered by strengthening economic indicators. Developments in the Middle East conflict could further moderate international oil prices, potentially serving as a catalyst for monetary easing. The market continues to trade at favorable valuations, with a forward price-to-earnings ratio of 6.3. Top investment picks include OGDC, PPL, UBL, MEBL, HBL, FFC, ENGROH, PSO, LUCK, FCCL, INDU, ILP, and SYS.