The benchmark KSE-100 Index extended its losses, falling another 333 points as Pakistan was downgraded from its status as an Emerging Market (EM) to the Frontier Markets (FM) Index by Morgan Stanley Capital International (MSCI) on Wednesday.

At close, the KSE-100 finished with a drop of 333.25 points or 0.71% to settle at 46,396.71.

The fall follows MSCI's decision to downgrade Pakistan, announced early Wednesday morning, coupled with a widening trade deficit and weakening rupee that has put the stock market under pressure.

Back to the 'smaller pond': MSCI to downgrade Pakistan to Frontier Market

After opening positive to inch close to the 47,000 level, the index quickly came under pressure.

In a note, Hasnain Malik, Head of Research at Tellimer Securities, said that the MSCI index classification, on the way up to EM or down to FM, is no indication of fundamental outlook; instead, it is a reflection of the change in ease of access and trading liquidity available for foreigners.

“It can be a precursor to substantial fund flows from passive funds or active funds that like to 'hug' their benchmark. In the case of Pakistan's shift back to MSCI FM, it is neither a signal of fundamentals nor of major fund flows.

“Therefore, more important than focusing on MSCI classification is taking note of the cheap value of Pakistan equities,” wrote Hasnain.

KSE-100 falls another 189 points as MSCI decision looms

The index has been under pressure for over two months, with the KSE-100 swinging between the 47,000-48,000 level since June. However, it has very recently breached the 47,000-point resistance.

On Wednesday, sectors dragging down the benchmark KSE-100 included cement (132.77 points), oil and gas exploration (71.76 points), and banking (55.31 points).

Volume on the all-share index increased from 423.76 million on Tuesday to 477.87 million on Wednesday. The value of shares traded during the session also recorded an increase to Rs14.69 billion from Rs11.29 billion.

TPL Corp Limited was the volume leader with 39.04 million shares, followed by Telecard Limited with 37.42 million shares, and Ghani Global Holdings at 35.37 million shares.

Shares of 524 companies were traded on Wednesday, of which 160 registered an increase, 344 recorded a fall, while 20 remained unchanged.