KARACHI, Sept 22: Stocks on Monday fell across the board on nervous selling caused by fears of political turmoil followed by an apparent failure of talks between the government and the MMA on the LFO. The KSE index fell by 177 points eroding Rs40bn from the market capitalization.

There was a confusion in the market after the trading resumed as bears took a dominant role in the absence of matching support by the bulls at the falling prices. No one was willing to make fresh commitments until the MMA’s official reaction to the constitutional package on LFO is known.

“The massive pruning appears to be a psychological reaction to official constitutional package given to MMA,” says a leading broker. “But I don’t think bears could change the positive basic fundamentals.”

Being in a highly overbought position, the market could shed another 100 or so points, it appears pretty difficult to pull it down from the current highs at least for the near-term, he adds.

The market’s terribly weak stance and nervousness was well-reflected in the KSE 100-share index, which suffered a fresh sharp setback of 176.96 points or 4.4 per cent at 4,211.93 as compared to the weekend 4,389.31. At one stage, it was off 200 points but late covering in pivotals allowed it close partially recovered from the initial lows.

The market capitalization also suffered a massive fall of Rs40 billion at Rs935 billion as the traded volume shrank to modest total of 288m shares from an average daily volume of 450m shares, reflecting the absence of leading investors from the market.

Although a loud whispering from the MMA sources suggests that it has already rejected the constitutional package presented by the government to it after lengthy parleys, its official reply will be known when its supreme council meets on Tuesday (Sept 23).

What seems to have worried investors, notably those who still hold long positions was the MMA threat to launch a mass movement against government and the official reaction to it could well mean a big showdown.

“From onward sailing on the political front may not be that smooth,” fears an analyst. “The absence of leading financial institutions as well as retailers reflects that most of them have already found the cue to coming events and are planning to leave the arena.”

MMA along with other major political parties may be working on different agendas but they are united on the LFO, he said adding “no one could deny the fact that they together have a tremendous street power to unsettle the political atmosphere.”

An ambitious disinvestment programme for the next month including sell-off of the controlling shares of the oil giant PSO to one of the short-listed strategic buyers may be further delayed if the opposition opts for political agitation.

“A part of the massive investment in the shares may have found their way into government securities owing to higher yield rates, bulk of it is still intact but could outflow in case of political violence,” some others said.

Already, a good amount of cash is finding its way into the gold trade where the prices have soared to an all time peak level of Rs7,210 per ten grams, while a section of investors is looking for other gainful avenues of investment sans stocks.

How will investors react to some of the good corporate announcements due during the next couple of days including the PTCL is pretty difficult to predict at this stage.

Energy, Auto and chemical shares led the market decline, falling like nine pins from their recent highs. Leading losers were led by Packages, BOC Pakistan, Clover Pakistan, Millat Tractors and IGI Insurance, off Rs8.15 to Rs9.50.

But the largest decline ranging from Rs11 to Rs45 were recorded in Glaxo-SKF, Pakistan Refinery, PSO, Pakistan Oilfields, Shell Pakistan, Unilever Pakistan and Javed Omer, off Rs11 to Rs45.

Gainers were led by Ishtiaq Textiles, Rupali Polyester, Bolan Casting, Shield Corporation, Gatron Industries, Sitara Chemicals and Treet Corporation, up Rs1.20 to Rs16.80.

Trading volume fell to 288m shares from the previous 429m shares as losers held a strong lead over the gainers at 340 to 32, with 23 shares holding on to the last levels.

The most active list was topped by PTCL, off 85 paisa at Rs37.60 on 82m shares followed by Hub-Power, lower Rs1.95 at Rs37.15 on 48m shares, FFC-Jordan Fertilizer, easy 65 paisa at Rs18.70 on 31m shares, PSO, sharply lower by Rs14.70 at Rs280.05 on 16m shares, Japan Power, lower 40 paisa at Rs8.50 on 16m shares and National Bank, off Rs1.90 at Rs49.50 on 11m shares.

FORWARD COUNTER: Speculative issues on the forward counter also followed the lead of their ready section counterparts, major losers among them being PSO, off Rs14.51 on 8m shares followed by Hub-Power, lower Rs1.96 at Rs37.24 on 12m shares and PTCL, easy by Rs1.08 at Rs37.52 on 18m shares.