Indices dip as market goes through correction

BOURSE: The market went through a correction last week with both indices slumping significantly. For the 1st four days of the week (Monday - Thursday) the ASPI (All Share Price Index) fell by 139 points or 4.7%, while the more sensitive MPI (Milanka Price Index) declined by 242 points or 5.8%.

On Friday the market picked up moderately, however failed to makeup for the losses recorded over the previous four days. It should be noted that even though both indices gained on Friday, activity levels were lowest for the week, while trading volumes too remained low.

The ASPI closed the week at 2862.2 points down by 119 points or 4% compared to last week, while the MPI dropped by 207 points or 4.95% closing the week on Friday at 3799.2 points.

As highlighted in one of our previous updates a market correction remains a healthy sign being a part of the cycle a stock market goes through and we reiterate the fact that there is no reason for investors to panic.

Blue chip counter JKH became the highest contributing counter towards turnover this week, contributing Rs.492.1 million towards weekly turnover.

Being in line with the declining market trend JKH share price dipped by 3.6% this week, closing at Rs.181 per share.

During the week approximately 2.6 million JKH shares traded, with the majority of 2.1 million shares trading on Tuesday. The trade, which went through on Tuesday, saw a boost in foreign purchases, as the trade went through as a local to foreign sale.

Investor appetite remained on telecom counters amid the share price of both SLT and Dialog declining this week.

The SLT share price declined by 7.2% compared to last week, closing at Rs.38.50 per share, while during the week the counter traded between a range of Rs.42.50 per share and Rs.36.50 per share. SLT saw 5.3 million shares trade this week, with the contribution towards weekly turnover amounting to Rs.205.5 million.

Dialog too showed a decline in its share price this week falling by 5.4% compared to last week, however the decline remained lower than what was witnessed in SLT. The counter closed the week at Rs.26 per share, while trading at a high of Rs.27.75 per share and a low of Rs.25.75 per share.

Around 3.9 million of Dialog shares traded this week, with the counter contributing Rs.104.5 million towards total turnover.

Distilleries was yet another counter, which saw its share price, decline sizably this week. The share price of the counter fell by 7.3% to close at Rs.115 per share, while the lowest price it touched was Rs.113 per share.

Contribution from the counter towards weekly turnover amounted to Rs.87.4 million, while a low 0.7 million of Distilleries shares traded for the week.

Looking at the top decliners for this week, it was dominated by hotel sector counters. The looser this week was Hotel services Ltd., apart from which three, hotel sector counters namely, Confifi Hotels, Associated Hotels and Seredib Hotels came under the top 10 losers for the week.

Total turnover this week was significantly low, falling by 42% compared to last week, to stand at Rs.1.7 billion. Average daily turnover remained at a low of Rs.373.4 million.

Foreign participation this week amounted to 29.7% of total activity, standing a little above last week’s participation level of 27.6%. Foreign investors were net buyers this week amounting to Rs.342.3 million.

Foreign purchases thus remained higher than sales, totalling Rs.725.9 million, with Tuesday grossing in the major part of foreign purchases amounting to Rs.409.3 million, due to a trade on JKH shares.

Foreign sales meanwhile amounted to Rs.383.6 million. Both foreign purchases and sales remained lower than last week.

SLT, Dialog, Nawaloka, Sierra Cables and Kelsey were among the highest traded stocks for the week.

Point of view

Indices to fluctuate in a wide range

Much anticipated correction was witnessed in the market as investors were aggressively looking at profit taking opportunities. Meanwhile as expected by us, the activity levels dropped significantly by 42% compared to last week. Overall the market came down by 3.97% or 118.5 points compared to last week’s closing level.

Mixed sentiments to continue

We do not expect a major shift in the market sentiment, thus the overall trend is likely to remain marginally negative on modest trading volumes during the coming week.

However we believe that bargain hunters would enter the market at different levels enabling the indices to somewhat hold its ground.

Therefore in our opinion a mix of profit taking and bargain hunting would keep the indices volatile offering investors with day trading opportunities.

Furthermore we advise investors to closely monitor the market in order to pick up growth counters such as SLT, Dialog and Distilleries at bargain price levels.

(This information has been compiled from sources that we believe to be reliable but we do nothold ourselves responsible for its completeness or accuracy. No matter published herein create any liability of any kind of HNB Stockbrokers (Private) Limited or its associates. All opinions views findings and conclusions included in this report constitute our judgment of this date and are subject to change without notice.)