The KSE-100 has been registering constant upward
movement and has crossed 4,000 level. At this juncture retail
investors are getting a little skeptical about of the future direction
of market. There is a group, which constantly make investor jittery by
saying that the index gains are temporary and market can crash any
time. As against this the overwhelming consent is that the index will
continue its upward stride, certainly with some corrections.
Saying this, analysts never forget to remind the
investors that currently market is highly overbought and is
susceptible to gain or loose 100 points during a day. While the market
continue to enjoy surplus liquidity, profit taking is also common.
Despite increase in prices of volume leaders the dividend yields are
still very attractive, at an average ranging from 6 to 10 per cent. At
these level the funds are continue to flow into equities market.
After the hike in prices of volume leaders, second
and third tier quality scrips succeeded in attracting the attention of
retail investors. However, investors' interest still remain high in
volume leaders. This mainly due to track record, earnings forecast,
dividend paying ability and improved economic fundamentals for these
companies. Market float and liquidity of specific scrips play key role
in investment decision making. Second and third tier scrips despite
offering relatively higher dividend yield often fail to attract
investors, being considered illiquid.
As the index continue upward movement there are
growing concern about bulging Badla volume. Higher Badla volume has
the potential to plunge the market, in case of default by any major
position holder. However, the chances remain low because of excessive
liquidity. In case of default by any other investor, there are more to
assume his/her position. The market remains vulnerable and prone to
disaster at the hands of weak holders. Therefore, it is necessary that
investors should adopt a more caution stance over the near term and
should not chase the rally at this juncture.
It is true that improving fundamentals based on
growth in economy are likely to lead to improved outlook for some
sectors. However, there are certain scrips do not justify the price
appreciation. It is only due to the persistent bull run in the market
swaying the prices of almost every scrip and not because of the
specific happening on the corporate and sector front. Some of these
stocks have surged because of over optimism, i.e. cement and PSF.
Though the long-term improvements have come, there are a lot of
short-term threats and difficulties that need to be addressed. As the
local investors often over react, the prices of these stocks may
easily slip to the point from where these surged in a time span,
shorter than one can even think of.
For a considerably long time the local equities
market has suffered due to economic downturn. However, this time a
protracted bull run has managed to remain firm. Though the basis and
sustenance of inflated values still raises certain reservations, the
bullish sentiments still prevail and expected to continue. Saying this
some analysts warn that if sentiments become bearish the fall may not
be orderly in nature. They also suggest profit taking in stocks where
the fundamentals or the returns that the stock can offer does not
justify the price surge.