KSE Morning Call For Monday 7th June 2010

Budgetary Updates
The Rs.450 billion allocated for Defence is Rs.107 billion more than the Rs.343 billion allocated for the 2009-10 fiscal. A separate allocation would be made for the war against terror. Quoting official sources, media reported Friday that the budget will recommend a 20 to 25 percent rise in salaries of government employees while tax recoveries have been targeted at Rs.1.7 trillion.

The budget has allocated Rs.660 billion for the Annual Development Programme (ADP), while sales tax will be increased one percent and incentives have been given for the salaried class. According to sources pricy to finance ministry, the regulatory duty on more than 250 edibles would be removed while an increase in the tax on cosmetics, tobacco and electronic goods is likely.

According to sources, the duty on import of vehicles is likely to be reduced by 10 percent, while a six percent increase would be announced in electricity prices.
The establishment of new power distribution companies would also be announced in the budget.



Market Expectation:
Technically market signaling the hope of recovery on weekly chart, sharp low and quick recovery in past sessions giving room to absorb the volatility and aftermath of the budget, now the budget FY11 announcement, over the weekend will minimize the uncertainty among the investors, High volatility expected with thin volumes.

Fertilizers and Oil sectors will be in limelight though the banks will follow later, it is recommended to be very selective in buying unless we see the proper interpretation of the budget, CGT will further damage the existing low volumes, the past week bullish move will provide cushion to the upcoming threat and trailed the stop loss around 10,500.

Hype of leverage product is almost over, so expect some resistance around 9,684 – 9,671. Comfort zone for bulls is little far from the current level. For intraday traders it is recommended to follow the precise levels with justified tolerance based on current volatility.

As it is mentioned earlier you may get some amazing prices after budget and that will be good time to buy and hold, as many of scrips are trading below its worth. Increasing liquidity will be right decision to enjoy the buying paradise.

That’s why we recommend TRADING ON LEVELS

Weekly Candle
Open 9,521
High 9,665
Low 9,170
Close 9,637
Total Move 495
Gain 116
% Gain 1.21%


Updated Levels
9,955
9,827
9,760
9,706
9,684 – 9,671
9,554
9,535 – 9,517
9,483 – 9,476
9,395 – 9,383
9,358
9,327
9,224
9,168


Foreign Investors Activities, 4th June, 2010: Net Sell USD $ 1,107,283 (Source: NCCPL)


Disclaimer:
This commentary, key levels and views are not a recommendation to buy or sell, but rather a guideline to interpreting the specified indicators. This information should only be used by investors who are aware of the risk inherent in securities trading. We accept no liability whatsoever for any loss arising from any use of these levels. However the author DOES NOT GUARANTEES the accuracy of information provided on this report and is NOT RESPONSIBLE FOR ANY ERRORS AND/OR OMISSIONS.