Muzzammil’s Desk - TCA Market call:

As we have been looking at different brokerage houses 2021 index calls. Almost everyone saying 50,000 to cross. The average outlook is 52,000 index which is almost 8,000 pts or 18% higher. (1/8)

As macro person, the biggest source of upside would be improved risk premium and market should re-rate by 0.8x to its trend rate 8.0x P/E. This will feed market at least 1/2 of the upside targeting 52k index level. (2/8)

The other 1/2 should come from resolution of sector specific issues e.g. circular debt, power & gas shedding, rationalisation of taxes & duties, exchange & interest rates etc. (3/8)

With visibility on circular debt re-payments, the laggard sectors power & oil covers more than 20% of market capitalisation- has potential to mark 25% price growth. This will give index 2,500 to 3,000 pts. The debt repayments would free up Banks loan book. (4/8)

This will help finance the industrial sector ongoing expansions. Don’t forget to give SBP credit of bridging financing gap through 'TERF' (5/8)

To strengthen, the growth outlook it is necessary to have good agriculture yield, which will eventually give boast to exports and contained inflation.

Lastly, if all goes well then we don’t need to wait till Dec end to see index 52k. It will hit before May 31st. (6/8)

The immediate triggers would be1) resumption of IMF program, 2) Getting out of FATF grey list, and 3) resolution of circular debt. (7/8)

Sectors to benefit

1) Power,
2) Oil,
3) Textiles,
4) Fertilizers,
5) Banks.

Cement, Steels has already price in but they will re-rate inline with market. (8/8)

Muzzammil Aslam
Founder & CEO
Tangent Capital Advisors Pvt Limited