KARACH, May 22: Stocks on Thursday suffered a sharp fall on panic selling triggered by reports of margin calls owing to over-exposure problems in which some investors were trapped and faced a possible default. The Karachi Stock Exchange (KSE) index was off 347.49 points or 2.49 per cent at 13,627.

The margin calls dominated trading followed by unloading in part of long positions of those who were trapped, leading to an amicable resolution of the over-exposure issue beyond their deposits and well in time.

Under the KSE rules, the borrowers are directed to adjust the difference between their deposits and their borrowing if the latter exceeds the former in a falling market by cash or share unloading to avert a possible default, analysts said.

It raised hopes that sailing in the afternoon session tomorrow will be smooth despite Moody’s downgrading of Pakistani bonds on the world financial centres. But some others said the market could run into deeper recession as borrowing costs would be more expensive after the central bank raised discount rate by 1.5 per cent to 12 per cent linking the hike with the rate of inflation.

“The snap sell-off appears to be a consensus effort of both the brokerage houses and the clients to save an alarming situation after overexposures of deposit limits by some of the prominent investors on certain counters and in the process the market witnessed a free for all for some time,” said a leading stock analyst.

The KSE 100-share index, which had been showing signs of recovery, again suffered a steep decline of 347.49 points or 2.49 points at 13,627 points chipping away a massive amount of Rs104 billion from the market capital just in one go.

Leading oil, banking, including Pakistan Oilfields, Pakistan Petroleum, National Bank, Engro Chemical, and MCB Bank, were in the forefront of major losers.

The KSE 30-shares index followed its senior partner but with a bigger jolt of 500.55 points or 3.02 per cent at 16,083.03 on heavy selling in the leading base shares.

“It may not be a single factor behind the prevailing panic,” said Faisal A. Rajabali, another leading analyst, said, adding: “terribly weak rupee, political uncertainty and absence of leading financial institutions also seem to have compounded the situation.”

But he hoped investors are expected to be back in the market and put it on the rails after the index touched its next resistance level of 13,500 points.

“Many may not like to stay away at the attractively lower levels and will resume short-covering operations, led by the financial institutions,” he added.

The outflow of big amounts of money from the markets to foreign centres owing to the prevailing political mess could be on its way back after sanity returns to the local turmoil almost on all the fronts and that will put the index back to its pre-reaction level, Ahsan Mehanti hopes.

Widespread losses and lower locks were spread all over the list under the lead of Unilever Pakistan and Attock Petroleum, off by Rs29.99 and Rs26, followed by JS Global, Habib Bank, National Bank, MCB Bank, Adamjee Insurance, Siemens Pakistan, Lakson Tobacco, PSO, Packages, EFU General and Life, and National Food, which suffered a fall, ranging from Rs10.09 to Rs23.55.

But on the other hand, Colgate Pakistan and Sapphire Textiles managed to put on gains, ranging from Rs14 and Rs12.25, respectively.

Millat Tractors, Shell Pakistan, Sanofi-Aventis, Sapphire Fibre, Mitchell’s Farms and some others also came in for stray support and rose by Rs4 to Rs6.70.

Trading volume rose to 192 million shares from the previous 176 million shares but losers forced a strong lead over the gainers at 273 to only 63, with 20 shares holding on to the last levels.

The OGDC topped the list of actives, up by 75 paisa at Rs133 on 14 million shares, followed by Pakistan Reinsurance Co, off Rs4.57 at Rs105.48 on 10m shares, Pakistan Petroleum, lower by Rs3.50 at Rs267 also on 10m shares, D G Khan Cement, off Rs3.75 at Rs84.50 on 8m shares, Arif Habib Securities, easy by Rs6.01 at Rs178.99 also on 8m shares, and National Bank, off Rs10.01 at Rs191.81 on 7m shares.

Pakisan Oilfields followed them, lower by Rs3.20 at Rs414.30 on 7m shares, Engro Chemical, off by Rs6.95 at Rs304 on 6m shares, NIB Bank, easy 86 paisa at Rs14.44 on 6m shares and Bank Alfalah, lower by Rs2.69 at Rs51.11 on 5m shares.

FORWARD COUNTER: National Bank came for active selling and led the list of actives, off Rs10.13 at Rs192.52 on 6m shares, followed by JS & Co, off Rs7.01 at Rs562.99 on 5m shares and Engro Chemical, lower by Rs7.50 at Rs304.50 also on 5m shares.