Updated Dec 3, 20

The KSE-100's share in the stock market's total trading volume stood at 96 per cent in FY10, indicating that the top 100 companies generate a major portion of trading activity in the stock market. Trading patterns can be used to establish the extent of diversity in the stock market and identify the sectors that attract investors and generate market activity.

The banking sector's trading volume grew at an average of 34 per cent during the FY00 to FY10, with the highest trading volume of 161 million in FY07. Trading volume growth in the banking sector averaged at 56 per cent during FY98-FY07, indicating that the trading activity in the banking sector slowed down in recent years, though it continued to contribute a significant portion to total trading volumes.

On the other hand, trading volume growth rates in the textile and fuel and energy sectors were 35 per cent and 9.5 per cent, respectively, during FY00 to FY10.

The share of the banking sector in total trading volume increased from three per cent in FY00 to an astonishing 46 per cent in FY10.

On average, one-fourth or 25pc of the trading activity, during the FY00 to FY10 was generated by the banking sector. On the other hand, the fuel and energy sector's contribution to total trading volume declined from 50pc in FY00 to 15pc in FY10.

Contribution of other sectors to aggregate trading volumes continued to remain low, indicating that the fuel and energy sector lost its share in trading activity to the banking sector.

The contribution of engineering, auto, electrical, and sugar sectors to overall trading activity in FY10 was 0.1pc, 0.4pc, 0.1pc, and 0.4pc respectively. Trading patterns for the decade of FY00-10 reveal that the banking sector has contributed significantly to trading activity and the trend is likely to continue.

The writer is an assistant professor at SZABIST.