KSE-100 falls as record inflation reading takes toll, volume remains low

After a two-day rally, the Pakistan Stock Exchange (PSX) tumbled on Monday as the KSE-100 index dropped 0.68% due to a sharp increase in inflation and expectation of interest rate hike by the State Bank of Pakistan in the upcoming monetary policy announcement.

The triggers jointly dragged the KSE-100 down by 283 points or 0.68%, with the index closing at 41,348.19. Volume on the all-share index fell near the 86-million mark as investor-interest also remained muted.

Consumer Price Index (CPI)-based inflation in Pakistan rose to its highest since December 2008 and hit 21.3% on a year-on-year (YoY) basis in June 2022, as rising commodity prices and a weaker rupee took a toll on the local economy.

Inflation in Pakistan hits 21.3%, highest since Dec 2008

The lofty reading was far higher than market expectations.

Due to significant jump in inflation, investors now expect the SBP to hike the interest rate by a huge margin in the forthcoming monetary policy meeting, scheduled currently for July 7.

Trading began on a volatile note and the KSE-100 traded on both sides of the spectrum in initial minutes. After some time, profit taking kicked in and the market began to descend. The drop flattened in the final hour and the KSE-100 index closed with a loss.

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Index-heavy automobile, cement, chemical, bank and oil sectors bore the brunt of dented sentiment and stocks from these sectors witnessed massive selling.

A report from Capital Stake stated that bearish sentiments prevailed on the first trading session of the week. Indices traded in red for most part of the day, while volumes fell from last close.

Arif Habib Limited, in its report, stated that the market stayed under pressure throughout the day due to concerns over mounting inflation and expected rate hike in the upcoming monetary policy.

Volumes remained dry in the main board although decent volumes were witnessed in the third tier stocks.

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Sectors dragging the benchmark KSE-100 index lower included fertiliser (72.61 points), cement sector (60.82 points) and oil and gas exploration sector (33.20 points).

Volume on the all-share index plunged to 86.6 million from 154 million on Friday. The value of shares traded fell to Rs3.05 billion from Rs4.03 billion recorded in the previous session.

Sui Northern Gas Pipeline was the volume leader with 12.47 million shares, followed by Agritech Limited with 8.09 million shares, and Pak Refinery with 4.39 million shares.

Shares of 303 companies were traded on Monday, of which 88 registered an increase, 197 recorded a fall, and 18 remained unchanged.