LAHORE – Constant rupee depreciation, economic uncertainty and gas closure for industrial sector kept the stock investors activity limited. Hence, the stocks closed bearish on foreign selling in blue- chip energy and oil stocks.

The KSE 100-index lost 222 points, down 2.0 percent WoW, while volumes improved marginally by 11 percent WoW to 42 million shares. Foreigners remained net sellers, offloading shares worth $6.7 million.

Experts said that investors at the local bourse remained bearish throughout the week. Downward revision in National Savings Schemes (NSS) rates (up to 84bps) coupled with Consumer Price Index (CPI) for Dec-2011 clocking in at 9.75 percent YoY failed to counter the negativity of the ongoing political uncertainty together with the imposition of Gas Infrastructure Development Cess (GIDC) and gas tariff hike. Towards the end of the week, ENGRO raised urea prices but this too could not change the bearish sentiment of the market.

The Central Directorate of National Savings (CDNS) has revised down the NSS rates by up to 84bps for the 1Q2012. The rates were revised to 11.67 percent, 11.76 percent, 13.86 percent and 11.90 percent of Special savings, Regular certificates, Behbood certificates and Defence savings certificates respectively. Moreover, the CPI for December clocked in at 9.75 percent YoY, it is for the first time in two years that inflation has dropped to a single digit. However, these numbers were unable to invoke positive sentiment amongst the investors.

Notification by Ogra regarding the imposition of GIDC and raise in gas tariff for different sectors from 14 percent to 207 percent set the negative tempo of the market from the very start of the week. ENGRO raised urea prices to mitigate the effect of GIDC and the gas tariff hike. Hence the fertilizer sector outperformed the market by 4.8 percent.

Experts said that bears gained control in the market as the bulls exhausted below 11,600 level. Experts fear, any further pressure would expose weakness towards 10,890 level and the index can possibly cross the low level of 10,760 in Aug 2011. Any further fall will target the level of 10,534 points, a 61.8 percent re-tracement on the rise from 9,131 to 12,768 levels. A deeper correction will aim towards 10,200-10,280 level. However, initial supply stands between 11,370-11,390 level, while a break above these levels will be capped around 11,540 level. Overall picture remains neutral to bearish below Oct 2011 high of 12,246 level.

Raise in local urea prices by Rs210/ bag by Engro and higher international oil prices on fears for supply disruptions after unrest in Iran and West relations kept valuations strong and institutional investors supported the index ahead of announcement expected on pending CGT issues at KSE.

Profit taking from the previous session evolved into a snowball effect today to bring the index down 174 points at 11,188. Daily participation clocked in at 24.56 million shares - down 38.6 percent compared to the previous session. Penetrating through the support at 11,200 (23.6 percent retracement) the next supports are now at 11,013 and 10,890. OGDC took the brunt of the sell off and closed below its major support at 144 (50 percent Fib retracement and 200 EMA). NBP managed to hold ground and is likely to retest 45. Stick to sidelines for now.

Experts said that the KSE-100 witnessed a decline of 4 percent in 4Q2011, following its fall of 6 percent in the previous quarter. Moreover, the local bourse underperformed the regional peers by 6 percent vs. its outperformance of 7 percent in 3Q2011. We believe, the dismal performance was due to heightened domestic political turbulence following the memo-gate controversy and NATO air strikes on Pakistani soldiers.

 along with the European debt crisis and murky outlook of global economies.

The market even ignored the unexpected cut of 150bps in discount rate.

 by the SBP, as it raised uneasiness over the country’s macroeconomic stability going forward. Subsequently, the average daily volumes remained dull at 60mn shares. Moreover, foreigners remained net sellers of US$111mn (inclusive of Xenal Industries selling its 12 percent stake worth US$60mn in HUBCO). FATIMA outperformed the KSE-100 index by an impressive 25 percent on the back of its exemption from Gas Infrastructure Development Cess (GIDC) due to its prior agreement with the government. On the other hand suspension of gas supply to ENGRO caused the stock to underperform by 30 percent during the period. Amongst other notable outperformers, OGDC gained 16 percent owing to discovery in Nashpa-2 and expectations of huge discovery at Zin block, while APL rose by 11 percent because of sustained growth in its volumetric sales.