Monetary policy blues: KSE-100 sheds 1.53%, falls below 43,000 mark

Downside pressures shrouded the Pakistan Stock Exchange on Monday as the benchmark KSE-100 index dropped 660 points, or 1.53%, ahead of the monetary policy announcement by the State Bank of Pakistan (SBP).

After the close of the session, the State Bank of Pakistan hiked the benchmark interest rate by 150 basis points, taking it to 11-year high level of 13.75%. A major chunk of the market expected the central bank to hike the interest rate by nearly 100 basis points, while a small segment forecasted a status quo in the policy rate.

SBP raises key interest rate by 150 basis points, takes it to 13.75%

A looming economic crisis and concerns over revival of the International Monetary Fund (IMF) bailout also dented investor sentiments.

The day kicked off with a slide as investors adopted a dump-and-run stance owing to pessimism on the monetary policy announcement. From this point onward, the index traded range-bound and reported minor fluctuations. By the end of the day there was a renewed selling spree, which alleviated some of the losses.

At close on Monday, the KSE-100 ended with a loss of 660.46 points, down 1.53%, to finish at 42,440.25.

On the economic front, Finance Minister Miftah Ismail said that his team would seek a ‘‘break’’ from the IMF, as the government could not hike the prices of petroleum products.

Experts have termed resumption of the IMF programme crucial, as the green signal from the international lender would pave for further funding from other creditors.

Ismail held the view that Pakistani public could not bear a massive increase in POL rates. Talks between Pakistan and the global lender are underway.

IMF talks: Pakistan to seek ‘break’ on rates of petroleum product, says Miftah

Fahad Rauf, Head of Reserach at Ismail Iqbal Securities, told Business Recorder that apart from monetary policy speculation, uncertainty over economic conditions and lack of news related to the stalled IMF bailout were also impacting the equity market.

A report from Arif Habib Limited stated that the market witnessed a bloodbath session as investor remained bearish throughout the day.

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Volumes remained dull in the main board although hefty volumes were observed in third tier stocks, it said.

Sector driving the benchmark index downwards included cement (112.71 points), fertiliser (90.37 points) and oil and gas exploration (79.34 points).

Volume on the all-share index fell to 118.99 million from 189.9 million a day prior. The value of shares traded contracted to Rs3.58 billion from Rs3.83 billion recorded in the previous session.

Silkbank was the volume leader with 9.98 million shares, followed by WorldCall Telecom with 7.62 million shares, and K-Electric Limited with 6.12 million shares.

Shares of 314 companies were traded on Friday, of which 48 registered an increase, 250 recorded a fall, and 16 remained unchanged.