Pakistan’s stock market witnessed its steepest single-day decline on Tuesday, with the benchmark KSE100 index plunging by 4.1% to reach 59,171 points, marking a record-breaking drop of 2,534 points. This significant correction follows the market’s recent record highs and signifies an 11% decrease, amounting to 7,256 points from its peak of 66,427 points on December 12. Financial analysts attribute the bearish trend to a corrective phase in the overheated market, exacerbated by the delay in interest rate cuts, escalating political activities ahead of general elections, and foreign investors selling off shares. Tahir Abbas, head of research at Arif Habib Limited, explained that the market has been in corrective mode for seven consecutive sessions, with minimal foreign investor participation due to New Year festivities, while the political climate and the approaching elections have further intensified the downward pressure on the index.
Despite hitting an all-time high at the beginning of the month amid speculations of an interest rate cut, the central bank maintained the rate at 22%, citing persistent high inflation. Yousuf Muhammad Farooq, director of research at Chase Securities, noted that the market’s anticipation of an interest rate cut in December, which was delayed, contributed to the current bearish sentiment. Farooq emphasized that the market, which had been rapidly ascending, is now undergoing a correction. Looking ahead, analysts suggest that the market’s trajectory will be influenced by the outcome of the upcoming elections and the implementation of the International Monetary Fund’s conditions. Khurram Schehzad, CEO of Alpha Beta Core, described the trading session as “Black Tuesday for the Pakistan Stock Exchange,” citing factors such as leverage buying and its settlement as contributors to the market’s decline.