SALMAN ABDUHOO LAHORE - The local equity market kept on its bullish trend in the lead of oil scrips, which appeared as the star performer, generating a strong rally in the E&P stocks during the outgoing week. The index crossed the barrier of 11,600 level after 127 weeks, as the market had not touched that level since July 11, 2008. According to the experts, the international oil prices crossed $90 per barrel during the week, which bode positive for the oil sector, as was reflected in the sectors performance, which is up by 1.7 percent weekly. The market saw a 1.9 percent increase during the week while the trading activity was driven by a 32 million increase in average volumes to an 8 month high of 182 million. The stock market experts are of the view that the KSE 100 gained 6 percent in Nov despite IMFs hard stance during policy level talks with Pakistan, political noise on tabling of the RGST bill and imposition of flood surcharge, besides depressed international markets amid the European financial concerns and Chinas monetary tightening. Though the SBP raised the discount rate by 50bps prior to the last trading day, market closed positively as it had already anticipated the decision. They said that in the month of Nov, average daily volumes improved by 18 percent monthly despite a traditionally dull period due to religious festivities. The trend of Foreign Portfolio Investment (FPI) remained consistent with the previous months, coming in at US$39mn. However, renewed interest of the locals witnessed in Oct, failed to keep the momentum in Nov. Amongst notables, energy scrips outperformed on the back of news reports of reduction in the turnover tax rate and an oil & gas discovery. On the macro front, inflation during the last week spiked to an 18 month high of 15.48 percent spillover effect of the floods and rising energy prices. Moreover, WTOs rejection of agreeing to export duty free concession for Pakistan from the EU was a dampener for the textile sector. Overall, average daily volumes improved by 22 percent to 182mn shares. The oil sector came out as the star performer with international oil prices crossing US$90 per barrel during the week, generating a strong rally in the E&P stocks particularly in PPL and POL which gained 2.9 percent and 5.9 percent WoW, respectively. Age limit for used cars import was raised to 5 years, which caused the sector to underperform the market by 4.3 percent. Moreover, EUs call for duty-free concessions for a list of export products from Pakistan was rejected at the WTO summit. As a result, ANL underperformed by 13 percent WoW. It also had a spillover effect on other key textile scrips like NML and NCL that underperformed by 7.5 percent and 7.7 percent, respectively. Foreigners concluded to be net buyers of US$11.9mn. Weak macro data came in this week, with inflation for Nov ballooning to an 18-month high of 15.48 percent, up from 15.33 percent recorded last month. Interestingly though, core inflation (ex food & energy) continues to remain in single digit, clocking in slightly higher at 9.5 percent. The foreign exchange reserves declined by $353mn to $16.39bn due to debt repayments. The KSE largely shunned the political noise on the RGST bill and imposition of flood surcharge and in the process outperformed the regional peers by 8 percent. International markets were mostly subdued in the month owing to news of the Irish financial crisis and monetary tightening by China. Energy scrips largely dominated the local bourse on the back of a reported reduction in the turnover tax rate, rising international oil prices, an oil and gas discovery in Makori-East and improving gross refinery margins (GRMs). After a solid performance in Oct because of rising local cement prices, cement scrips witnessed a slight correction in the outgoing month. Cement offtake for 5MFY11 offtake clocked in at 12.2mn tons recording a 12 percent YoY decline. However, the Oct-Nov period offtake (2.4mn tons) declined by a mere 3 percent on a YoY basis indicating that demand appears to be stabilizing Negative news flow one notch downward revision of 5 major listed banks by Moodys and BP rejecting joint bid by OGDC and PPL together with possible hike in PIB cutoffs during next weeks auction may not bode well for the index which has maintained its rising trend in the last three months. Market has started to stall around 11,600 after penetrating above the 61.8 percent retracement level of 15,740 4,780. The KSE100 marked a peak level of 11,676 during the week.