As earnings season draws to an end:

Stocks stabilize

The market closed flat on Monday. However the indices reordered encouraging gains on Tuesday while remaining largely stable during the rest of the week, as the 2Q earnings season neared its conclusion. Retail investor interest on selected mid cap stocks coupled with interest on selected blue-chip stocks such as JKH and Commercial Bank were the key drivers of market activity this week. The ASPI (All Share Price Index) gained 21.7 points or 0.9 percent this week, to close at 2522.9 points while the MPI (Milanka Price Index) saw an improvement of 34.4 points or 1.2 percent to close the week at 2851.0 points.

Market heavyweight JKH took the top slot in terms of contribution towards total turnover for this week. JKH managed a turnover contribution of Rs.497.9 million or 26.3 percent of the weekly turnover on a total volume of 3.7 million shares. The share price rose by 2.9 percent during the week to close at Rs.134.00 per share. During the week the counter peaked at a high of Rs.137.00 per share, while trading at a low of Rs.130.00 per share.

Also trading sizeable volumes and becoming the second highest traded stock for the week was Environmental Resources (GREG), trading approximately 3.9 million shares during the week amidst GREG warrants coming to the market on Thursday. The counter injected Rs.136.6 million to the week’s turnover on the back of heavy retail interest. However the share price of GREG edged down WoW (Week on Week) to close Rs.0.75 or 1.9 percent lower at Rs.38.00 for the week.

Among the banking stocks to generate the largest portion of turnover was Commercial Bank (COMB) with Rs.128.2 million of turnover generated on a volume of 0.9 million shares, with the biggest part of Rs.70.7 million coming on Tuesday.

COMB’s share price showed a 1.6 percent improvement compared to last week, to close on Friday at Rs.145.75 per share. Sampath was the other banking counter to emerge among the top five contributors with a turnover of Rs.50.4 million. However Sampath during the week closed unchanged at Rs.137.00 per share.

Total turnover this week amounted to Rs.1.9 billion, with average daily turnover standing at Rs.378.0 million, showing a WoW increase of 11.5 percent.

Foreign investors were net sellers this week, totaling Rs.78.7 million for the week.

However foreign purchases and foreign sales were slightly higher this week, resulting in foreign participation standing at 28.5 percent of total activity compared to last week, which posted same at 23.3 percent. Foreign purchases stood at Rs.499.8 million, up by 10.1 percent compared to last week, while the foreign sales amounted to Rs.578.5 million increasing by 72.8 percent compared to last week.

Volume wise highest traded stocks during the week were Nawaloka, Environmental Resources, JKH, Dialog and Piramal Glass.

[Point of View]

Market to maintain stability; look for undervalued counters

As we expected the market stabilized this week after a poor run last week on 2Q earnings woes. Week-on-Week ASPI gained by a marginal 0.9 percent while MPI gained 1.2 percent, however, volumes continued to be moderate.

We do not expect a major shift in market direction over the coming week, thus indices are more likely to be static with moderate volumes trading ahead of the month end. In our view, this period of stability would give the opportunity for the investors to carefully pick undervalued counters in the market. Thus we advise the investors to selectively take positions in fundamentally strong counters with a medium term view.

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