Market of Pakistan is in amongst top performing market due to its upward surge in indices. And stock market of a country is also barometer of its economy. Question remains that booming stock market of Pakistan really reflect stable growth in economy and how far sustainability of bull trend is justified. Answer of these questions can best be picked up from following facts:-
1. During last five years number of investors trading in stock exchange have not been visibly on increasing side significantly in proportion to market performance. Primary indices have gained more than five times but participation of investors has even not doubled up. So base fails to broaden and vertically high build up in market remains a weak structure.
2. Owing to narrow base, volumes were seen as sore issue popping up time to time especially while market is over performing from last couple of years. Reduce volumes affects small brokerage houses mostly, where primary business of stock trade is taking place. News and rumors related to brokerage houses shakes confidence of markets.
3. Economic indicators remain blurring. GDP on difficult road forward, interest rate on higher side, dearth of energy resources, tax collection figures depressing, external and internal debt on strutting up and circular debt unresolved justifying phenomenal development in listed companies remains question mark
4. FIPI increasing is making market more prone to its stability. Inflow of foreign investment in consistent order is not assured and negative trend is expected to offer sheer and sharp fall in index graphs.
5. Herding remains only driving sentiments of our market. Investors, over a period of time, have not been groomed to use financial literacy’s tool effectively
6. KSE -100 index is not a real reflection of stock market performance Some stocks like Nestle, Unilever, and OGDC etc.. carry much heavy weight in indices and rapid price movement on either side makes proportional drive in indices not indicating growing or depressing trend with realism.
7.Corporate governance still in evolution phase seeking lot of dedicated work. Investor’s protection program in particular is blank. Confidence of investors is lacking in market and awareness program are less in number and frequency.
The views arc purely for teaming and discussion purpose and should not be taken as buy or sell call
Fahim Akhtar (Stock Analyst)