KARACHI: The stock market witnessed a bloodbath on Thursday with red splashed across the board. The KSE-100 index opened with a massive loss of 942 points and within minutes caved in to hit intraday low by 1,073 points.

The index closed with a loss of 882 points, or 1.91 per cent, at 45,279, with a huge sum of Rs143bn wiped off market capitalisation. Out of the total actively traded stocks, only 46 managed to edge forward while 358 sank.

The behaviour of the market was as unexpected as the defeat of the government candidate in the Senate elections on the hotly contested Islamabad seat. Traders said that the government’s setback in no way demonstrated its ouster, but panic gripped investors and weak investors thought it prudent to dump risky shares first and ask questions later.

The investors’ fears were exacerbated over Covid-19 that caused 75 deaths on Wednesday, representing the highest number in three months. The troubles were compounded also by the unfavourable developments on the international front where the rising US bond yields have shaken up global markets; the face of future international oil prices also remains uncertain until the outcome of the Opec+ meeting.

After the initial sell-off, major participants tried to calm the market. It received support from reports that the prime minister would seek vote of confidence from parliament to pre-empt the opposition’s demand to seek a no-confidence motion. Partly as a result of return of sanity and partly due to the highly attractive valuations after the big fall, the bullishly inclined institutional investors rushed to lap up value stocks, which saw the index bounce back to recover all but 350 points.

Past mid-day the index succumbed to renewed selling pressure by mutual funds, mainly due to meet redemptions. The figures released by the National Clearing Company of Pakistan showed all-out sell-off by mutual funds of stocks worth $21.57m. Much of the liquidity was mopped up by banks that took fresh positions in shares valued at $15.13m.

Selling was observed across the board throughout the day. Brokerage Arif Habib Ltd calculated that the sectors that washed away most points from the index included cement (167 points), banks (142 points), E&P (71 points), fertiliser (71 points) and power (60 points). Stocks that contributed negatively included Lucky Cement washing away 67 points from the index, TRG (53 points), HBL (35 points), Hubco (34 points) and UBL (31points).

The trading volume increased 9pc to 441.3m shares from 403.6m shares the previous day. The trading value on the contrary declined by 10pc to reach $135m as against $149.5m. The volume leaders for the day were K-Electric, Ghani Global Ltd, Byco, World Call, TRG and Unity Foods which collectively contributed more than 145m shares to the total turnover.

Major market participants were unwilling to hazard a guess for the future. They said that political and economic uncertainty may remain for the time being as Dr Hafeez would no longer be able to hold the position of minister after six months putting all his economic moves under the shadow. But some analysts and marketmen retained optimism.

Insight Securities stated that a positive journey in equity market would continue given strong external position under the direction of IMF programme, improvement at the fiscal deficit front and strong recovery in corporate earnings. “While the market is strong fundamentally and is taking its technical support at 45,000 points, clarity would emerge after the vote of confidence” said Hayat Khan, Equity sales trader at BMA Capital.

Published in Dawn, March 5th, 2021