IMS Day Wrap – Deconstructed

Unlike expectations of a range bound session, the 100 index reacted violently to occurrence of an accident at FCCL plant on 29th May, 2016 that resulted in collapse of Raw Meal Silo and damage to Coal Mill Area of Line 2. From the looks of it the aforementioned 7,200 TPD line will be shut for approximately 5-6 months. With this news circulating among the market participant over the weekend the stock opened at its lower limit, trading approximately 200k shares during the day, and eventually closed at its lower circuit with an outstanding offer of 37mn shares (with the earnings being wiped out for FY171H it seems like the stock will see another 15-20% downside from these levels – pretty scary but numbers don’t lie).

During the course of the day, market sentiment got worse with profit taking dominating the scene, leading to a broad based sell off to the tune of 459.57 pts (-1.27%) at 36,234.69. Market participation remained on the thin side with 100 index trading 108mn shares throughout the day compared to 101mn on Friday. Taking its inspiration from Metallica’s “My friend of Misery” the cement sector held onto the concept of “One man's fun is another's hell” leading to significant gains in names that are likely to recapture FCCL’s market share e.g. KOHC, CHCC, DGKC and MLCF. E&P names also came under selling pressure due to pull back in crude oil prices after it touched USD50/barrel last week. Except HASCOL, which closed up on its second consecutive upper limit after announcement of developing and operating an oil storage facility with 15% equity stake at PQA, other OMCs staged a dull session marked by profit taking. Refineries also faced a similar fate and were subjected to profit taking during the course of the day.

Today’s damaged sentiment also exerted downside pressure on Banks, Fertilizers, Steel, Multi-utilities, Glass, Power, Pharmaceutical and Autos. In a nutshell, only Textile as a sector, stood out as the winner during today’s session on the back of possibility of resumption of zero-rating regime after Dar said that all possible facilitation would be extended to the textile sector in the budget 2016-17. From contribution to index perspective MCB, HBL, LUCK, OGDC & FCCL took away 224 pts compared to positive contribution from MLCF, NESTLE, MTL, KOHC and HASCOL to the tune of 49 pts. Average traded value for the session stood at USD 70.67mn.

Technically speaking, with 10 EMA taken out convincingly today we expect 20EMA (36,039) to act as support for now.