KARACHI: Bears tightened their grip on the Pakistan Stock Exchange (PSX) on Thursday as the benchmark index plummeted by around 1,250 points, or 2.7 per cent, driven by concerns about the country’s faltering economy, rumours of an impending interest rate hike, and the persistent depreciation of the rupee.

It was the year’s second-biggest overnight decline in the benchmark KSE-100 index in terms of points, with the largest drop seen on Jan 17 when the index lost 1,379 points.

Besides, the stock market fell 6.3pc (3,032 points) in August, logging the highest monthly decline since March 2020, just a month after the coronavirus pandemic struck the country, according to the research firm Arif Habib Ltd. The market’s fall in August also stood in stark contrast to a 16pc growth in July.

However, the current index level — at 45,002 points — is still 8.6pc and 11.3pc higher than the beginning of this fiscal year and calendar year.

Analysts noted that the market downturn could be attributed to investor worries regarding the consistent decline in the rupee’s value. Additionally, fears of increased electricity and gas prices, which investors fear could lead the State Bank of Pakistan to raise the interest rate in the upcoming monetary policy announcement on Sept 14, contributed to the decline.

Ahsan Mehanti, managing director and CEO at Arif Habib Commodities, commented that stocks experienced a sharp decline due to economic uncertainties caused by the rupee’s depreciation and speculations of an interest rate hike. Investor confidence continued to wane as negative news kept impacting sentiment.

Selling pressure intensified in stock market as the rupee depreciated by Rs1.09, reaching an all-time low of Rs305.54 against the dollar, down from Rs304.45 the previous day.

The economic distress extended beyond the financial and equity markets, affecting the gold market as well. Gold prices in the country surged by Rs3,400 to reach Rs239,800 per tola, and by Rs2,915 to Rs205,589 per 10 grams compared to the previous day.

On Thursday, the benchmark KSE-100 index hit a nadir of 44,459.62, experiencing a sharp decline of 1,784.93 points, before modestly recovering to 45,002, marking a decrease of 1,242.14 points, or 2.7pc, at the close compared to the previous day.

During the MSCI quarterly rebalance that took place on the same day, 15 stocks were added to the MSCI FM Index, increasing the total constituents from Pakistan in the index to 17, according to a Topline Securities daily report.

Another analyst at Arif Habib Ltd mentioned that a sharp rally of more than 500 points towards the end of the trading session, driven by market-on-close orders resulting from the MSCI rebalance, lifted the market from its lows.

However, the market rem­ains 1,000 points away from the bottom of the support zone at 46,000. The analyst emphasised the need for a strong upward movement the following day to conclude the week on a positive note and maintain immediate upside potential.

Market analysts believe that the absence of positive signals from the caretaker government regarding the ongoing economic crisis in the country played a pivotal role in triggering panic in the equity market.

“Caretaker Finance Minister Shamshad Akhtar’s assertion for lack of fiscal capacity to give subsidies relief on power bills and concerns for unresolved circular debt crises in the power sector played a catalyst role in bearish close,” Mr Mehanti said.

Ms Akhtar on Wednesday warned that Pakistan’s economic situation was “worse than anticipated” and the government did not have “fiscal space” to provide subsidies.

“Unfortunately, we have done everything to weaken the economy,” she said, adding that the Federal Board of Reve­nue’s tax collection was low while the expenditure was high.

She said that 70pc of the country’s tax revenue was being spent on debt relief and that the rupee was under pressure due to the dollar’s low inflows and high outflows.

“The next elected government would have to re-engage with independent power producers,” Ms Akhtar stated.

Traded volume and value for the day stood at 287m shares and Rs12.3bn, respectively.

Companies registering the biggest increases in their share prices in absolute terms were Sitara Chemical (Rs15.22), Suraj Cotton (Rs7.63), Nagina Cotton (Rs4.50), Al-Noor Sugar (Rs4.16), and Systems Limited (Rs2.45).

Companies that recorded the biggest declines in their share prices in absolute terms Rafhan Maize (Rs255), Nestle Pak (Rs188.38), Bhanero Textiles (Rs75), Mehmood Textiles (Rs51), and Al-Abbas Sugar (Rs36.98).

Stocks contributing significantly to the traded volume included WorldCall Telecom (31.86m shares), Oil and Gas Development Company Limited (17.49m shares), Cnergyico PK (13.08m shares), Pak Refinery (12.29m shares) and Pak Petroleum (12.26m shares).

Foreigners were net buyers as they picked shares worth $2.06m.

Published in Dawn, September 1st, 2023