KARACHI: Equities fell like ninepins on heightened nervousness amid rising political noise and missile programme-related US sanctions on Pakistani companies, sending investors rushing off to dump stocks and book profit for the third straight session on Thursday, inflicting an unprecedented single-day loss to the benchmark KSE 100 index.

In contrast to the global market performance, the local bourse witnessed extreme volatility as a lack of triggers and selling by jittery investors saw the stocks cave in like a house of cards across all sectors.

Initially, the KSE-100 index briefly touched the day’s high of 111,745.03 after gaining 674.73 points but failed to sustain the rally and plunged 5,132.92 points to 105,937.37. By the session’s close, the index had witnessed record bleeding of 4,795.31 points or 4.32pc to settle at 106,274.98 points.

Explaining factors that drove the market’s sharp downturn, Aqeel Karim Dhedhi, a leading stockbroker and chairman of the AKD Group, told Dawn that the market is experiencing an extensive correction phase caused by massive selling by mutual funds. “ Major insurance and banking companies that had invested heavily in mutual funds in the last three months opted to book capital gains because of approaching year-end closing. As a result, the mutual funds went on a selling spree amid high redemption calls,” he elaborated.

Market capital shrinks $5bn in three sessions

He, however, admitted that there were some other factors fuelling selling pressure, including political tensions and the upcoming inauguration of the Trump administration in the United States, which nervous investors fearing a policy shift or deterioration in relations with the new US government. “The government should understand that internal political stability is crucial to sustaining the economic achievements and must bring the opposition party to the negotiation table and resolve differences, which would restore foreign investors’ confidence in the national economy and pave the way for attracting much-needed dollar inflows.”

Mr Aqeel also said the correction was a healthy phase to consolidate gains since the PSX had rallied relentlessly to a record peak at 116,169 on Dec 16.

Without ruling out further prunings in the upcoming sessions before the year-end, he said the withdrawn funds and profits would be reinvested in the market with the advent of the new year since the falling interest rate and banks’ reluctance to accept large deposits, given the advance-to-deposit ratio condition left no option for old and new corporate and individual investors but the equities market for earning handsome returns.

The index lost 9,894 points or 8.51pc in three sessions post-rate cut, indicating extreme panic-selling as investors lost Rs541bn ($2bn) in just a single day.

“The PSX capitalisation plunged by $5 billion in the last three sessions, which looks bad, but we must not judge the performance based on a steep correction since the market capital surged from $22.5bn eight months back to $55bn mid-December. So on a quarterly-to-quarter basis, the PSX turned in robust returns of up to 50pc, which reflects the market’s upside potential in the coming weeks,” Mr Aqeel asserted.

Topline Securities Ltd noted that the bloodbath at PSX was led by heavyweights like Mari Petroleum, Hub Power, United Bank, OGDC, and Engro Corporation, contributing a staggering 1,556 points to the index’s overall decline.

Mari Petroleum lost 10pc, locking at the lower circuit for the third consecutive session due to persistent concerns over its overvaluation, particularly concerning near-term fundamentals, fuelled the relentless sell-off. Ahsan Mehanti of Arif Habib Corporation said the panic-selling was driven by investors’ outlook for cautious SBP policy rate easing on multiple susceptible risks.

He added that weak global crude oil prices and institutional selling in overbought scrips also played a catalyst in record bearish activity at PSX.

Ali Najib, Head of Sales at Insight Securities, said investors chose to trim their positions before the year-end and concerns over the introduction of Tax Laws Amendment Bill 2024 in the National Assembly, targeting non-filers — limiting their ability to invest in mutual funds or even maintain bank accounts — were adding to the uncertainty.

Exploration and production, fertiliser, power, banks and cement sectors received most of the selling pressure.

The trading volume slightly rose 4.98pc to 1.16 billion shares while the traded value dipped 5.71pc to Rs56.79bn day-on-day.

Mutual funds and foreigners remained net sellers as they sold shares worth $19.43m and $5.03m. However, individuals and banks continued value-hunting, picking shares worth $9.73m and $7.67m, respectively.

Published in Dawn, December 20th, 2024