A minor positive start after an expected policy rate cut was followed by negativity at the Pakistan Stock Exchange (PSX) as the benchmark index lost another 663 points to close below 73,000 on Tuesday.
The KSE-100 started the session positive, hitting an intra-day high of 73,866.45.
However, uncertainty kicked in and drove the index into the negative territory.
At close, the benchmark index settled at 72,589.49, down by 663.07 points or 0.91%.
Selling was witnessed in commercial banks, fertiliser, oil and gas exploration companies, OMCs, refinery and construction sectors.
Index-heavy stocks including OGDC, PPL, SHEL, SNGPL, PRL, HBL, MCB and MEBL were in the red.
The pressure comes amid uncertainty among market stakeholders over measures to be announced in the upcoming budget for fiscal year 2024-25, which is to be presented on Wednesday.
In a key development, the State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) decided on Monday to reduce the key policy rate by 150 basis points (bps), taking it to 20.5%, effective from June 11, 2024.
In its statement, the MPC said that while the significant decline in inflation since February was broadly in line with expectations, the May outturn was better than anticipated earlier.
“The MPC assessed that underlying inflationary pressures are also subsiding amidst a tight monetary policy stance, supported by fiscal consolidation,” it said.
This was the first cut in the key policy rate in four years. The last time the central bank reduced the rate was in June 2020 during the pandemic. Since then, the interest rate has gradually gone from 7% to a record high of 22% where it stayed for almost a year.
The market factored in the cut in the morning, but the expected move was overshadowed by rumours over negative measures in the budget.
While unconfirmed, analysts believe the government will come up with harsh measures to tax the formal sector.
On Monday, the benchmark KSE-100 index lost over 500 points to settle at 73,252.56.
Globally, Asian stocks were in a guarded mood on Tuesday as investors pondered fresh political uncertainty in European markets after right-wing gains in elections and a snap poll in France revived concerns about the cohesion of the bloc.
Moves were mostly modest, with MSCI’s broadest index of Asia-Pacific shares outside Japan dipping 0.5% in thin trade. Chinese blue chips fell 1.2%, having been shut on Monday, while the yuan hit a seven-month low.
Meanwhile, the Pakistani rupee depreciated marginally against the US dollar, falling 0.05% in the inter-bank market on Tuesday. At close, the local unit settled at 278.50, a decline of Re0.13 against the greenback.
Volume on the all-share index decreased to 372.54 million from 350.72 million a session ago.
The value of shares rose to Rs11.65 billion from Rs10.18 billion in the previous session.
K-Electric Ltd was the volume leader with 45.9 million shares, followed by WorldCall Telecom with 33.25 million shares, and Pervez Ahmed Co with 29.02 million shares.
Shares of 431 companies were traded on Tuesday, of which 107 registered an increase, 263 recorded a fall, while 61 remained unchanged.