The Pakistan Stock Exchange (PSX) saw bears dominating for the third successive session this week, with shares plummeting by more than 400 points on Thursday following the State Bank of Pakistan (SBP)’s decision to maintain its key policy rate.
The benchmark KSE-100 index traded in negative territory throughout the day, closing at 70,657.64, down by 444.90 points or 0.63% from the previous close of 71,102.54.
According to industry experts, the market’s downturn is due to a correction phase and profit-taking activity following the SBP’s rate stability decision whereas there may be a potential extended period of rate stability, with expected tax hikes and budget adjustments.
The SBP’s decision to maintain the status quo by keeping the key policy rate at 22% for the seventh consecutive policy meeting reflects a strategic approach to maintaining significant positive real interest rates. This strategy aims to curb inflation and align it within the target range of 5-7% by September 2025.
It was further noted that April’s inflation stood at 17.3% year-on-year (YoY) and experienced a negative 0.4% month-on-month (MoM) trend, indicating a downward trajectory that could pave the way for future rate cuts.
Recent data from the Pakistan Bureau of Statistics (PBS) revealed a slowdown in consumer price inflation to 17.3% in April, reinforcing the market’s correction trend.
Despite market corrections and concerns, Farooq highlighted some positive traction in cement stocks following the inflation figures release. He emphasized the market’s affordability and anticipated earnings recovery for cyclical sectors as the economy gradually rebounds.
In summary, the PSX’s bearish trend and market corrections reflect a cautious stance amid economic uncertainties, with a focus on policy stability and inflation management shaping market sentiments.
