Shares at PSX shed nearly 1,500 points as market transitions to ‘normalised phase’

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Bears dominate trading floor at PSX as shares decline by nearly 1,500 points. — PSX data portal
Bears dominate trading floor at PSX as shares decline by nearly 1,500 points. — PSX data portal

Bears dominated the trading floor on Tuesday at the Pakistan Stock Exchange (PSX) as shares declined by nearly 1,500 points, neutralising the rampant bulls run yesterday which saw the market rise by more than 4,000 points.

The benchmark KSE-100 index declined by 1,509.61 points, or 1.33pc, to close at 112,414.80 points from the last close of 113,924.41 points.

Yousuf M. Farooq, research director at Chase Securities, said that the market was transitioning into a more normalised phase where earnings would drive “performance rather than rerating”.

“The market has already rerated upwards, driven by a sharp decline in interest rates from nearly 21 per cent in June to 12pc currently,” Farooq said while speaking to Dawn.com.

He said that stocks have been “priced in much of this interest rate movement”, adding that they expected that “interest rates would decline at a slower pace, given the need to maintain macroeconomic stability”.

“In the short term, market movements remain unpredictable and are heavily influenced by flows. However, in the long term, the market acts as a weighing machine, reflecting intrinsic value,” he said.

He said that while current valuations were still “below long-term averages”, the market had the potential of delivering “above-average long-term returns”.

He advised retail investors to allocate “only surplus funds earmarked for long-term investment into a diversified portfolio of companies they understand”.

Awais Ashraf, research director at AKD Securities, said that “investors have shed position in the highest weighted stocks on concerns regarding the unification of gas prices”.

“Some stocks are in negative due to overvaluation concerns,” Ashraf said, adding that there were some pressures due to rollover week.

“We believe [the] market is continuing to rally as interest rates are anticipated to fall to single digits in CY25 due to a strong external account,” he said.

“Falling returns from alternative investments are expected to make equities the preferred asset class in 2025,” he added.

Samiullah Tariq, director research and business development at Arif Habib Limited, said that the decline was a result of aggressive profit-taking given the “significant” increase the market has seen lately.

Yesterday, bullish momentum continued at the PSX as shares climbed more than 4,000 points.

Last week, bears had dominated the trade floor shares declined by nearly 3,800 points, two days after the State Bank of Pakistan (SBP) cautiously eased the interest rate to 13pc, reiterating that core inflation, which stood at 9.7pc, was “proving to be sticky, whereas inflation expectations of consumers and businesses remain volatile”.

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