KARACHI, March 21: Many analysts and most players at the Karachi Stock Exchange still believe it to be a major correction. They dispel investors’ fear of an imminent collapse of the market. The KSE 100-share index has tumbled by 1,205 points in the last four trading days. But one of the most powerful and of late outspoken stock broker, Aqeel Karim Dhedhi, offers comforting words to investors: “The market would certainly settle in a day or two”, Aqeel told Dawn on Monday evening. His argument was that the index had risen too high too fast and what goes up must come down. He pointed out that last week the index had lost 804 points, but consider what had happened a week before that: index had gained 809 points. The correction, he says, then was imminent.

When prices were rising, everyone jumped on the bandwagon. Looking greedily at Rs30 rise in price of OGDC stock of the par value of Rs10 each day and Rs10 in share price of PPL, hundreds of small shareholders entered at the wrong point in time. Then came this sudden plunge.

On Monday most of the stocks on almost all popular sectors: cement, banking and oil & gas closed at their lowest circuit breakers (5 per cent lower than last closing price). But the giant among them all — OGDC, opened at its lowest lock (5 per cent or Rs8.35 down) to Rs159.55. Like most of the other scrips it stayed there for rest of the day. Oil & gas sector that constitutes 45 per cent of total index weightage was mainly responsible both for the recent bull and the bear rampages. Fundamentally, there was hardly anything wrong. Privatization stories keep coming up and so do those of discovery of new oil and gas fields. The construction of “dams” had rallied the cement sector. Was there any change there? Nor was there any big set back on the political front. High multiples of stocks couldn’t also be the factor for banking giant; NBP was priced at a low multiple of 11x and still remained locked at lowest circuit breaker for all of Monday.

But there were many theories doing the round for the free fall of the index. One that made most sense was that big investors had taken massive position in the March Future market, where the prices were as high as 30 to 100 per cent in relation to the ready counter. With settlement due on Friday, those players were desperate to square up their positions for which they have to sell in the ready market, or else take delivery. That had drained the market of buyers. But another whispering involved an upcountry based high-flying brokerage house, which was rumoured to have been stuck up in heavy positions in the energy sector. Optimists believe that an out of market agreement with a particular large stock broker had relieved the situation and subscribed to the view that market could witness a recovery on Tuesday.

Several analysts at stock brokerage firms were also optimistic. In their closing report of Monday, BMA Capital Market wrote: “Market lost a further 400-point in the day’s session, the index could find support at the 9,000 level where we may see some buying”. And analysts at Elixir Securities said on Monday evening: “Now is the time for the bold ones to re-enter. We would recommend our valued clients to buy PSO, PPL, Nishat Mills, Adamjee Insurance, the two fertilizer giants, Engro Chemicals and Fauji Fertilizer for trading purposes tomorrow”. The analysts admitted that the previous saviour of the market, OGDC, was the culprit in the market on Monday, due to its heavy weightage in the index. No one is quite sure of Tuesday, but the key to the market direction rests quite clearly on opening up of lower locks of major stocks.