The benchmark KSE-100 index plunged as much as 1,105 points or 2.45 per cent on Tuesday on the back of political uncertainty in the country after the recent Senate election and the upcoming polls for Senate chairman and deputy chairman.
At around 12:15pm, the index — which had opened at 45,051 — dipped 1,105 points to 43,946 to hit the day's low. Although shares did recover some of these losses during the rest of the day, the bears still dominated trading with the benchmark index closing at 44,223 – 828 points or 1.84pc in the red.
“Stocks closed lower on economic uncertainty and rising political noise,” said Ahsan Mehanti, an analyst at Arif Habib Ltd.
The political situation in the country remains uncertain after the ruling PTI government faced an upset on the Islamabad Senate seat last week, where opposition's Yousuf Raza Gilani defeated Finance Minister Hafeez Shaikh by five votes, forcing Prime Minister Imran Khan to go for a vote of confidence from the National Assembly.
“Banking and fertilizer scrips outperformed on strong valuations,” Mehanti noted.
“Speculations on a likely surge in SBP policy rate on higher CPI inflation and uncertainty over outcome of IMF condition to restrict current circular debt, limit fiscal deficit at 7pc and hike in govt bond yields played a catalyst role for a bearish close,” according to him.
A day earlier on Monday, the KSE-100 index had tumbled to close with heavy losses of 786 points, or 1.72 per cent.
The past two days have seen the market wipe off over 75pc (1,614 points) of the gains made this year. Today's close (44,223 points) is just 468 points higher than the close recorded on Dec 31, 2020 of 43,775 points.
Initially, investors were excited over the expression of confidence in Prime Minister Imran Khan by the National Assembly last Saturday. The retention of Dr Hafeez Sheikh as the head of finance and the major jump in international oil prices over the weekend signaled that the market might head firmly to the north.
But the investors’ exuberance died down soon after trading began on Monday and the index spiralled down to an intraday low by 988 points, as the realisation dawned that the uncertainty on the political front was far from over with the opposition mobilising forces to install their candidate on the seat of chairman Senate as well as to dislodge the Punjab chief minister.
Other than that investors were spooked by the recent rapid surge in inflation and the upcoming monetary policy.