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Just when you thought the stock market has found stability, pop opens the floor and just like that the benchmark index drops 947 points. Thats about 4.3 percent fall since last Friday and about 9 percent lower from its all-time high of 36,228 hit on August 6 2015.
You talk to market people and you get a host of answers. Top on the list of reasons is foreign selling in "the wake of regional sell, global weakness (which in turn is in backdrop of China slowdown and Yuan rows) and also in the wake of PKR depreciation".
That argument sounds fair enough until you realise that a grand total of $71 million worth of equities were sold between August 7 and September 6 (yesterday FIPI data wasn't updated at the time of writing this, but that number should be nominal given yesterday's volume)
But when you consider the fact that $91 million worth of equities between January 1 and August 6 (the day KSE-100 hit its highest), a period during which the index rose nearly 13 percent from 32,131 to 36,228 points, then the foreign selling arguments seems only crying wolf.
The second most touted reason is weak oil, and selling by local funds such as capital protected funds that are structured to sell off positions when the market heads south. But really, oil has been weak for months and during all that time the KSE-100 has generally been uppish, whereas local fund selling doesn't usually drive market lower.
One story that has been making rounds for some time is the opening of old dusty cases at the KSE. One senior market participant told BR Research on the condition of anonymity that the FIA in tandem with the SECP is investigating the 2005 and 2008 crashes. Another said that eleven brokers may have even been identified.
But these only seem to be stories; stories that are part fact and part fiction. Fact because, well, the SECP has been on a drive to make the market more transparent where shareholders interests are safeguarded; fiction because the rumour mill has a vivid imagination and has a tendency of blowing things out of proportion.
The real factor behind KSE-slide it seems is a natural corrective mechanism, which sets into play every time the market hits new highs and then finds excuses to take a breather. The age old rule of thumb is that the sharper the rally north, the sharper the correction following which the market resumes its northward journey provided the meta-trend is up. This column would shed light on the meta trend in tomorrow's columns but in the meanwhile, the rule of thumb suggests that KSE-100 may weaken till 29000-30100 in the near term at the most - a level that should invite some cherry picking of stocks.

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