The Pakistan Stock Exchange (PSX) witnessed a sharp sell-off on Wednesday as investors cashed in on the gains made by the benchmark KSE-100 Index, which had reached an all-time high of 67,093 points earlier in the day.
The index, however, could not sustain the momentum and fell to as low as 64,427.38 points, before closing at 65,280.16 points, down by 1146.62 points or 1.73%.
The market was influenced by the expectations of a cut in the policy rate by the State Bank of Pakistan (SBP) and the signs of easing inflation in the near future, which boosted the demand for the index-heavy sectors such as cement, chemical, commercial banks, fertiliser, OMCs, power generation and distribution.
These sectors were the main drivers of the historic rally of the index, which had become the fastest growing in South Asia in the last two months. However, some profit-taking and correction was inevitable after the rapid rise, as the market also faced some political uncertainty and external challenges.
The market sentiment was bearish on Wednesday as most of the sectors traded in the negative territory, especially the heavyweights such as automobile assemblers, cement, chemical, commercial banks, and refinery.
In past weeks, the investor confidence was boosted by the improvement in the country’s financial indicators, such as the expected loan tranche of $700 million from the International Monetary Fund (IMF) in December, expected $2 billion inflow from the World Bank in FY24, the extension of a $3 billion deposit by Saudi Arabia, and the above-target tax collection by the Federal Board of Revenue (FBR).
The market experts believe that the interest rates have peaked and are likely to decline from 2024, which would attract more flows to the equity market. They also expect the corporate earnings to improve in the coming quarters, reflecting the economic recovery.
The PSX had seen a phenomenal rise of nearly 17% and the highest foreign investment in six years of $34.5 million in November 2023, indicating the strong confidence of investors in the country’s economic revival.
This was the second-highest monthly return in percentage terms in over a decade, only behind Covid’s abnormal return in April 2020.
The surge in Pakistan’s stock market rally had been a pivotal factor in the 50% increase in the benchmark index since late June, making it the world’s second-best performer during this period, following Argentina.
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