However the market continued the previous week’s late rally, with the broader index edging up a cumulative 129.58 points on Wednesday and Thursday before slipping to 5,522.72 points (on the All Share Price Index) on Friday, Acuity Stockbrokers said in a market report.
"The mid-week ASPI surpassed 5,500 points for the first time in nearly a month, backed by improved sentiment following the Central Bank’s announcement of a policy rate cut," the report said.
Volumes, nevertheless, remained broadly unchanged with a daily average turnover value of Rs.0.55 billion against the previous week’s Rs.0.54 billion and the year-to-date average of Rs.0.9 billion, Acuity said.
"Markets are likely to remain mostly subdued ahead of the holidays," the report said.
Analysts described the Central Bank’s announcement last Wednesday of reduced key policy rates as a largely unexpected move. The December rate was reduced by 25 basic points to 7.5% for repos and 9.50% for reverse repos.
"The accommodative stance which comes after a lapse of seven months was mostly unforeseen by markets specially as November inflation levels edged higher (9.5%) year-on-year versus 8.9% yoy in October due to supply-side constraints, Acuity said.
"The Central Bank, however, eased its policy corridor citing the efficacy of the demand management policies and its expectations for moderate inflation by the second quarter of 2013," the report said.
As a result, market rates also declined last week with the yield on six-month Treasuries dropping a significant 32 basic points to 11.78% relative to 12.10% the previous week.
Meanwhile, the Central Bank underscored its stance still further by announcing the possible removal of the current credit ceiling, adding that recent trends in credit markets indicate a reasonable leeway for such a move, Acuity said.
The ASPI was up 135.39 points (2.51%) last week while the MPI was up 145.95 points (2.98%) and S&P SL20 moved up 70.94 points (2.40%).
Foreign investors continued to chase JKH which made the highest contribution to last week’s turnover value accounting for 11.33% of the total turnover – Rs.310 million. HNB followed closely contributing Rs.301.39 million (11.01%) while Commercial Bank accounted for Rs.285.11 million (10.42%).
Foreign investors closed the week in a net buying position of Rs.0.18 billion against Rs.0.98 billion a week earlier. Average daily net inflows amounted to Rs.35.77 million against the previous week’s Rs.195.09 million.
John Keells Stock brokers reported that "the indices rebounded sharply on the back of a surprise cut in rates," saying that the rally was led by diversified, beverage and banking sector large caps.
Trades on JKH, HNB, ComBank, Dialog, CTC and Nestle accounted for 55% of the weekly turnover inclusive of crossings, the JKSB weekly report said.
It said that foreign activity remained strong over the week resulting in a net inflow of Rs.178.8 million. NDB, ComBank, Dialog, CTC and Nestle accounted for 55% of tdhe weekly turnover inclusive of crossings, the JKSB week report said.
It said that foreign activity remained strong over the week.