KARACHI: Stocks on Tuesday rose above 350 points to settle at Karachi Stock Exchange (KSE) benchmark 100-share index at 28, 425, DawnNews reported.

Hours ago, stocks tumbled over 450 points at the KSE 100 index, sparked by fears of a political crisis as opposition figures called on supporters to join a march against the government on August 14.

The KSE-100 index plunged by 450 points to 27,635 in the first 12 minutes of the morning trading session.

Today's decline came a day after the stock market suffered its largest ever one-day drop in share prices with the KSE-100 index witnessing a free fall of 1,309.09 points, or 4.46 per cent.

The development comes as Islamabad braces for protest marches led by Imran Khan and Tahirul Qadri who have vowed to topple the government of Prime Minister Nawaz Sharif.

The two plan to march on August 14 accompanied by tens of thousands of supporters and have claimed that last year's general election was rigged.

Both protest rallies will be held on Thursday when Pakistan celebrates its independence day.

Pakistan's economic outlook has generally improved since the government of business-friendly Sharif came to power.

Foreign exchange reserves have doubled from $7 billion to $14 billion following successful negotiations with the International Monetary Fund for debt servicing assistance, the sale of bonds, as well as auctions for 3G and 4G licences.

In July, ratings agency Moody's upgraded Pakistan's country outlook to 'stable' from 'negative' citing its improving external liquidity position and commitment to reforms.

The market is panicking. You shouldn’t

The article extract below was published in Dawn's Sunday Magazine, August 10, 2014

The Karachi Stock Exchange is notoriously bad at judging the impact of political events on financial outcomes. That means that, for a politically sophisticated observer, market gyrations brought about by mass political protests or other political noise — such as those of this past week — can represent a fantastic buying opportunity.

Why is the market so bad at judging political events, you might ask? Because nearly all Pakistanis have been taught lies about our history, and our culture of keeping silent about inconvenient truths means that most people have not developed a world view that conforms to reality. This is why we believe in stupid conspiracy theories that basically all boil down to “we’re perfect and the whole world is jealous and out to get us”.

You may not think this matters to markets and investing, but it does.

The KSE is more than just the physical stock exchange and its management.

It is the 200 brokerage firms, their thousands of employees and hundreds of thousands of clients all making investment decisions simultaneously that results in a collective view of what they think the future holds.

Any market is subject to the delusions and hysteria that grip its participants. In other countries, such delusions and myths tend to be about economic matters.

In ours, the political and religious can be quite important as well.

Nonetheless, over the long run, the market is forced to reconcile with reality, because commerce trumps ideology for enough people enough of the time.

That means that, while the short run can seem to validate those delusions held by the public, the long run will bear out the investment hypotheses of those who are aware of reality.