KARACHI: Despite an ample flow of positive economic data, including a sixth straight cut in the interest rate, the Pakistani shares witnessed a broad-based bloodbath as nervous investors continued unloading their positions following the confirmation of the suspension of US aid to Pakistan, pushing the benchmark index further lower below 112,000 intraday on Tuesday.

The index hit an intraday low of 111,435 points but settled at 112,030.36, down 1,489.96 points or 1.31pc day-on-day.

Answering Dawn’s queries, Ali Najib, Head of Sales at Insight Securities, attributed the downturn to heightened political and economic uncertainty, overshadowing positive developments like the policy rate cut and robust macroeconomic data. “Investors are cautious, as political instability raises concerns about policy continuity and governance, while persistent fiscal challenges continue to dampen confidence,” he said.

Listing other depressants, he said the ongoing rollover week also contributed to market volatility, amplifying selling pressure as investors liquidate positions due to liquidity concerns.

“Weak sentiment is further driven by doubts about the sustainability of recent improvements, worrying local and foreign investors to opt for safer assets over equities,” he remarked.

Foreign outflows and anticipation of subdued

corporate earnings in key sectors like banks also weighed heavily on the market sentiments.

“The southward journey reflects a sentiment-driven market, where fear outweighs fundamentals. In the short-term, volatility may persist until clarity emerges on political and economic fronts,” Mr Najib observed.

However, he suggested that the market holds long-term potential if structural reforms are implemented consistently.

He added that a selective investment approach in fundamentally strong, export-oriented, or undervalued sectors could provide opportunities during this period of uncertainty.

Ahsan Mehanti of Arif Habib Corporation noted that the market remained bearish after the State Bank of Pakistan’s cautious rate cut amid high core inflation and evolving risks.

He added that dismal financial results in the oil sector, gas reforms impacting industrial activities, rupee instability and uncertainty over the outcome of the government talks with the PTI fuelled bearish activity at the PSX.

Topline Securities Ltd said the negative sentiment was driven by the January rollover and weaker-than-expected results, putting additional pressure on the market.

Published in Dawn, January 29th, 2025