KSEs move yesterday gave too severe a headache to too many people. Not because it fell, but because how it fell.
After opening mixed, and managing to pull off some 65 points in the positive in early trading, the benchmark index languished its way down to 9,610 points by noon.
This wasn so scary. Weakness has been the order of the month and 77 points decline at midday was by and large a non-event.
Plus, Asian markets were generally lower, so were the European shares and so was Dow Futures at the time of writing this note (1700 hrs PST, Tuesday).
Amid overall risk to global recovery, on account of EU woes, the decline in foreign markets, partly justified the trend until Tuesdays midday.
But what happened afterwards was horrifying. Simply put, there was a blood bath on the floor.
The market simply ignored the positive news emanating from Islamabad as the Supreme Court adjourned the proceedings on NRO for two weeks.
Then what was behind KSEs second biggest single day loss since January 2010. Apparently, its not the CGT.
According to a leading tax expert, CGT will either be implemented on buying after July 1 - or - on the price of June 30th for all the holdings prior to that and will be implemented on its selling thereafter.
In case of the first proposal, the market should be bullish prior to June, whereas in the case of second, market players should be eyeing higher prices by June end. Hence, CGT is not the culprit.
The word on the street is that it was primarily local institutions including banks and DFIs selling yesterday. Market reports suggest that Faysal Bank is single-handedly responsible for the selling on Tuesday, owing to falling international markets.
Broad selling was witnessed from other institutions, particularly, Arif Habib Bank. It made a margin call to a leading brokerage house which it was unable to meet, thus had to offload some of its holdings.
Others say they heard a noise in the market that big brokers who missed the recent rally triggered by foreigners have ample cash, but are waiting for the market to come down to a certain level before they start pressing the buy button.
What actually happened, one may never know; but expect as many stories as mouths. Still, one plausible reason is the reaction to the central banks policy statement.
Though, the SBP kept its rates unchanged in its review on Monday, as widely expected by the market, it didn mince words much while pointing out the threats, implying that a rate hike might be unavoidable sometime late this year.
And it appears that the bond market has already started to price this in. After easing to its recent lows of 12.50 in early may, 10-year PIB yields have risen back to 12.60. For those who don know what happens to equities when PIB yields starts ticking up, see graph, those who do, know well that the time is ripe to remain cautious.
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