The Pakistan Stock Exchange's (PSX) benchmark KSE-100 index shed more than 400 points on Tuesday, with analysts attributing the fall to the central bank's hike in the interest rate coupled with the current political situation.

According to the PSX website, the KSE-100 index had gone down by 434.15 points, or 1.02 per cent, around 2:15pm. By the day's end, the benchmark index had lost 489.93 points, or 1.15pc.

Ahsan Mehanti of Arif Habib Corporation attributed the slump to the political deadlock in the country in light of the PTI's long march to Islamabad and the government's reaction to it, saying the situation was making investors anxious.

He said "investors are withdrawing capital from the market while foreign investors are prioritising selling shares," adding that the shares of cement and textile companies were witnessing a sharp decline.

The government has decided to ban the holding of the march by the PTI, blocking routes across Punjab and sealing entry points to the capital a night after it raided houses of PTI activists and leaders across the province.

Imran, on the other hand, has refused to back down and has vowed to continue with the march to the capital along with his supporters, saying it is his right to conduct a peaceful protest.

Mehanti also said the State Bank of Pakistan' s (SBP) decision to hike the interest rate by 150 basis points had also dented sentiment

"It was expected that the rate would be increased by one per cent," he said, adding that the slump could continue for some time.

Ali Malik, chief executive of First National Equities Limited, also echoed similar views, stating that the hike in the policy rate had impacted the market negatively. Malik said investors were choosing to put money in fixed-income securities due to a favourable interest rate.

The country's political scenario, he added, with PTI Chairman Imran Khan calling for a long march on May 25 (tomorrow), had also forced investors to exit the market.

Hamza Shehzad, chief executive of Alpha Beta Core, said: "Until we embark on a comprehensive reforms programme and unless all, or majority, of political parties agree on a common agenda i.e. charter of democracy, and work towards achieving a common goal for the country by running a reform process to undo and redo the system, we will continue to return to such vulnerabilities."

On Monday, the central bank increased the policy rate by 150 basis points to 13.75 per cent in a bid to arrest inflation. The move was aimed at cooling down the overheated economy, which is expected to grow at almost 6pc in 2021-22. Economic growth is expected to moderate to 3.5-4.5pc in 2022-23 on the back of monetary tightening and assumed fiscal consolidation.

The Monetary Policy Committee’s (MPC) baseline outlook assumed continued engagement with the International Monetary Fund (IMF) as well as the reversal of fuel and electricity subsidies together with the normalisation of the petroleum development levy (PDL) and general sales tax on fuel in 2022-23.

Headline inflation is likely to increase temporarily and may remain elevated throughout the next fiscal year, the SBP said, adding that it’s expected to fall to the 5-7pc target range by the end of 2023-24.

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