KARACHI: Stocks fell for the third consecutive day on Wednesday with the KSE-100 index taking a deep plunge of 432.24 points or 1.53 per cent to settle at 27,811.35.

Bearish sentiment prevailed on all sectors as investors dumped stocks and switched to other secure investments.

The volatile political atmosphere sent shivers down the spine of nervous investors. Foreign investors sold equities worth $2.31 million on Wednesday.

Also read: Stocks extend overnight losses

Yet, optimists said that the market had priced in the bad news over the political situation. Zubair Ghulamhussain, head of equity sales at Foundation Securities, argued that the market had already taken a correction of 9.9pc from its peak and majority of the blue chip stocks had lost between 20 and 30pc of the value. He said that technically stock markets stabilise after a correction of 9 to 12pc.

He did not believe that foreign outflows were worrisome. “Until something really bad comes up, foreigners are not likely to ditch Pakistani stocks,” said Zubair.

Analyst Arhum Ghous at JS Global observed that Lucky Cement and Engro hit their lower circuit due to the selling pressure.

The analyst expected the market to remain volatile with a negative bias as politics was thought to decide the short term direction either towards north or south.

“Investors will keenly look at foreign portfolio flows as any large outflow will induce more selling from local participants. We advise a defensive strategy with focus on high dividend yield stocks,” recommended the analyst.

Fall in banking spreads to 5.95pc in July 2014; Rs700bn estimated loss on political crisis, investors concerns on deadline given by the political party (PAT) and reluctance by foreign investors despite record bullish global markets played a catalyst role in bearish activity at KSE, analyst Mehanti said.

Published in Dawn, August 28th, 2014