More than 100 people were killed last week in Karachi, Pakistan's biggest city and commercial capital, in a surge in political violence.

Despite a lull in violence over the weekend, dealers say investors remain concerned.

"The extremely low volumes clearly show investors are very concerned," said Sajid Bhanji, director at brokers Arif Habib Ltd.

The Karachi Stock Exchange's benchmark 100-share index ended 0.79 percent, or 98.22 points, lower at 12,291.90, on turnover of only 31.59 million shares.

Volume fell to a 10-month low of 29.53 million shares on Friday.

"Investors are very concerned about the law and order situation in Karachi, and to add to that, the announcement by the US that it was withholding part of its aid to the military added to the negative sentiment," said Bhanji.

The Pakistani army spokesman said on Monday that the US decision to suspend $800 million in military assistance will not affect the army's operations, but analysts say the move is likely to fray ties and could harm the country's economy.

In the currency market, the rupee ended at 85.93/96 to the dollar, little changed from Friday's close amid steady demand for dollars from importers, dealers said.

The rupee hit a record low of 86.50 in May, and dealers said the local unit is expected to stay largely stable in the medium term because of increased remittances from Pakistanis working abroad.

According to official data, remittances topped $10 billion for the first time, hitting $10.1 billion in the first 11 months of the 2010/11 fiscal year, an increase of 25.20 percent compared with the same period last year.

In the money market, overnight rates were unchanged at 13.90 percent in tight liquidity, dealers said.

Copyright Reuters, 2011