The Karachi Stock Exchange (KSE) on Wednesday suffered a drastic decline of 545 points - the biggest in the history in terms of points - under unabated selling pressure where most of the pivotals closed on lower circuit breakers, despite the fact that institutional support came in the initial hours of trading.
Despite opening on a negative note, the index managed to make a high of 9459, up 144 points, but then fell by 694 points, taking the market to a seven-month low of under 8765. It would be worth mentioning that the market breached its intra-day low record of 496 points.
Moreover, this was the highest percentage drop, of 5.9 percent, in over four years. As per trading rules and regulations, up to a 10 percent decline was possible in scrips, which closed at their lower circuits, five percent down from Tuesday, which allowed such a drastic decline in the market.
Volumes, on the other hand, depicted increase to 145 million shares against 88 million shares recorded on Tuesday. Bulk of this volume was generated from the selling side as investors vacated the declining market.
The market saw some support in the morning session when it received some infusion of liquidity. EOBI, State Life and some banks injected liquidity and bought shares which held promise of good return, but selling pressure discouraged other investors to put money in the sagging market.
Market men feared that the index would fall further as several investors were facing difficulties to settle their outstanding positions. Several brokers have called margins of their investors to place their house in order. For this, a few unloaded in the open position, resulting in heavy selling. Genuine investors also sold their holdings as their capital was slowly being wiped out, and to avert huge losses they were also in line to sell their portfolios.
A major historical collapse was witnessed as the KSE-100 index plummeted by 548 points, or 5.9 percent, to close at 8767 points level, breaching another psychological level of 9000 points.
This was the maximum single-day decline ever at KSE as the double lower circuit mechanism was applied on most scrips. However, exceptions were OGDCL and PSO.
"Cumulatively, the index has lost 1081 points during last three sessions. Following Tuesday's declining trend, the market started on a negative note" said Tanvir Abid, head of institutional sales at Live Securities.
Across-the-board hefty selling pressure caused the index to take a deep plunge to the day's lowest level at 8748 points. PTCL, NBP, PPL, POL D G Khan Cement, MCB Bank, BoP, Lucky Cement, SSGC, Maple Leaf Cement, NML and SNGPL lost approximately 10 percent, as double lower lock was applied on them.
Following the oil & gas discovery news, OGDCL rose by 4.1 percent to Rs 126.60 intra-day high. However, the scrip closed at its first lower lock at Rs 115.50.
In the broader market, 243 scrips declined, 53 advanced while the value of 14 scrips remained unchanged.
Total trading volume in ready market increased by 65 percent to 145 million shares, against 88 million shares of Tuesday. Stocks that dipped 10 percent on Wednesday have the potential of another 20 percent fall on Thursday!
Numerous rumours remained afloat with respect to financial position of some brokers. "The fear factor that stocks might bleed for 10 percent was pretty much there, but to actually see it happening was unexpected and, quite frankly, uncalled for", said Noor Hameed from Elixir Securities. "The market is in a turbulent phase, and at this point in time it seems unstoppable."
There must be an intervention, either divine or mortal, to save the market from completely imploding. Although there was quite a decent support above the 9,000 level from local institutions, it did not work out, and the market kept sliding. 'The market is fundamentally screaming 'Buy' but the last few sessions flushed all confidence into the drain. We maintain our stance on the market and feel that once confidence is restored the market will recover almost as sharply as it went down."
Ahsan Mehanti, Chief Executive Officer of Shahzad Chamdia Securities, said that redemption calls at mutual funds triggered more selling pressure as some of the funds were squaring their positions to meet their obligations. Though support came from financial institutions, the avalanche of selling pressure wiped out all efforts of these entities to improve sentiment.
"The weak sentiment and investors' reluctance have magnified the problems and the government, or some big funding, is quired to boost the sentiment."