Investors cautious as PSX awaits earnings reports

Bearish sentiment prevailed on the trading floor of the Pakistan Stock Exchange (PSX) on a recent day, with investors closely observing corporate earnings and the recent monetary policy announcement. The benchmark KSE-100 Index exhibited a notable decline, closing at 112,030.36, marking a sharp drop of 1,489.96 points or a -1.31% decrease from the previous session’s close of 113,520.32. Throughout the day, the index reached an intraday high of 113,644.71 but also faced a low of 111,434.95.

According to Ahfaz Mustafa, CEO of Ismail Iqbal Securities, the ongoing earnings season has influenced stock performance, with stocks reacting to earnings news and payouts. Mustafa highlighted that disappointment in payouts impacted the oil sector, resulting in broader market weakness. The pressure from underwhelming earnings reports on Monday continued into the next trading day, creating cautiousness among investors before upcoming earnings announcements.

One of the major factors contributing to market weakness was Mari Energies Limited’s recent earnings report, showcasing a 19% year-on-year decline in profitability for H1FY25. The company reported Rs30,396 million (EPS: Rs25.32) compared to Rs37,505 million (EPS: Rs31.24) in H1FY24. Additionally, Mari witnessed a 39% YoY decrease in quarterly profit to Rs11,168 million (EPS: Rs9.30) due to rising operational costs and an increase in royalty.

Moreover, the State Bank of Pakistan (SBP) slashed its key policy rate by 100 basis points to 12%, marking the sixth consecutive rate cut since June 2024. The SBP Governor acknowledged that while inflation is expected to decrease in the coming months, core inflation remains high. The central bank projected an average inflation rate between 5.5% and 7.5% for the fiscal year ending in June 2025, aiming to stimulate economic activity and business sentiment.

To address rising gas tariffs, the government redirected Rs82 billion from state-owned Sui gas companies’ profits to protect consumers from increased utility costs. Originally allocated to reduce circular debt, these funds will now prevent an escalation in gas tariffs for ordinary consumers. Petroleum Minister Musadik Malik assured consumers that the government is taking steps to alleviate their financial burdens amidst economic challenges.

The week began on a negative note for the market, with the KSE-100 Index dropping 1,360.16 points, or 1.18%, to close at 113,520.32. This decline was influenced by weak corporate results and cautiousness surrounding the upcoming monetary policy announcement. As the earnings season unfolds, market participants are advised to remain attentive to corporate performance and dividend expectations.