Negativity persisted at the Pakistan Stock Exchange (PSX) on Thursday as the benchmark KSE-100 Index extended losses owing to sharp increase in yields in the secondary market, which sparked fears of further hike in the policy rate by the central bank.

In the auction on Wednesday, the cut-off yield of all T-bills rose by 55 to 75 basis points. Resultantly, the KSE-100 index witnessed a drop of 518.13 points or 1.21% to end at 42,237.91 points.

KSE-100 falls below 43,000 as profit-taking kicks in

The cut-off yield of 3-month short term government securities rose by 75 bps to 15.25% while returns of 6-month Market Treasury Bills amounted to 15.25%, up by 55 bps. Additionally, the cut-off yield of 12-month T-bills increased 75 bps to 15.5%.

SBP raises Rs792bn through auction for MTBs, cut-off yield soars up to 75 bps

Stock market players now expect the State Bank of Pakistan to increase the benchmark interest rate in a surprise meeting, or at the next monetary policy meeting.

This triggered panic among market participants and they rushed to dump their holdings.

After trading in the positive zone for a brief period, the market slid as investors preferred to book profits. Market participants remained on the sidelines, leading to thin trading volumes. Value hunting emerged in the final hour but still the KSE-100 index closed with losses.

A report from Topline Securities stated Pakistan equities witnessed a bearish trend on the backdrop of more than expected increase in the yields of Treasury Bills. The yields have risen 55-75 bps in different tenures on Wednesday’s auction.

Capital Stake said indices slipped lower while volumes contracted further. Equity markets around the globe also showed a negative trend, it said.

On the economic front, the local currency maintained an uptrend for the fifth successive session against the US dollar and closed at 197.59 in the inter-bank market on Thursday.

Fifth day of gain: Rupee appreciates to 197.59 against dollar

Sectors dragging the benchmark KSE-100 index downwards included banking (107 points), fertiliser (66.62 points) and cement (65.24 points).

Volume on the all-share index contracted to 157 million from 194.4 million on Wednesday. The value of shares traded decreased to Rs5.29 billion from Rs5.35 billion recorded in the previous session.

Pak Refinery was the volume leader with 14.99 million shares, followed by Unity Foods Limited with 10.97 million shares, and Cnergyico PK with 9.87 million shares.

Shares of 345 companies were traded on Thursday, of which 75 registered an increase, 254 recorded a fall, and 16 remained unchanged.