A minor positive start after an expected policy rate cut was followed by negativity at the Pakistan Stock Exchange (PSX) as the benchmark index lost over 600 points during trading on Tuesday.
At 1:35pm, the benchmark index was hovering at 72,586.10 level, a decrease of 666.46 points or 0.91%.
Selling was witnessed in commercial banks, fertiliser, oil and gas exploration companies, OMCs, refinery and construction sectors.
Index-heavy stocks including OGDC, PPL, SHEL, SNGPL, PRL, HBL, MCB and MEBL were in the red.
The pressure comes amid uncertainty among market stakeholders over measures to be announced in the upcoming budget for fiscal year 2024-25, which is to be presented on Wednesday.
In a key development, the State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) decided on Monday to reduce the key policy rate by 150 basis points (bps), taking it to 20.5%, effective from June 11, 2024.
In its statement, the MPC said that while the significant decline in inflation since February was broadly in line with expectations, the May outturn was better than anticipated earlier.
“The MPC assessed that underlying inflationary pressures are also subsiding amidst a tight monetary policy stance, supported by fiscal consolidation,” it said.
This was the first cut in the key policy rate in four years. The last time the central bank reduced the rate was in June 2020 during the pandemic. Since then, the interest rate has gradually gone from 7% to a record high of 22% where it stayed for almost a year.
The market factored in the cut in the morning, but the expected move was overshadowed by rumours over negative measures in the budget.
While unconfirmed, analysts believe the government will come up with harsh measures to tax the formal sector.
On Monday, the benchmark KSE-100 index lost over 500 points to settle at 73,252.56.
American Dollar Exchange Rate