KARACHI: Stocks are likely to come under pressure on Monday as the cut of 50 basis points in the State Bank of Pakistan’s key policy rate was below market expectations, but dealers said losses could be trimmed amid introduction of several liquidity measures.

The central bank on Friday announced a rate cut of 50 basis points to 10 per cent. According to a poll conducted by Dawn, majority of analysts were expecting 100bps cut in discount rate.

“The market is likely to witness selling on Monday due to a lower than expected cut in interest rates and as it is also close to its highest ever level,” said Shuja Rizvi from Al Hoqqani Securities.

The KSE-index hit an all-time high for two consecutive sessions with 15,789 points on Thursday but closed lower on Friday at 15,754.39 points. Dealers said investors are likely to square some of their positions at these levels before taking any fresh positions.

The sectors which are likely to benefit are the cement, textile and fertiliser.

But there are some positives that would support the market such as new liquidity measures that the State Bank introduced on Friday which is likely to benefit the banking sector.

“Reduction in daily Cash Reserve Requirements (CRR) by 100 basis points at an average five per cent signals that the central bank is eager to see more liquidity in banking system to promote economic activity,” said Mohammed Sohail, chief executive at Topline Securities.

Another positive factor for the market will be that the State Bank in its latest monetary policy statement was slightly more confident about achieving the full year target for inflation.

“A consistent deceleration in inflation since May 2012 to 8.8 per cent in September is more than earlier estimates. Thus, despite an expected uptick in H2-FY13, the overall inflation outlook has improved. In fact, the likelihood of meeting the 9.5 per cent inflation target for FY13 has increased,” the SBP said in a statement.

This compared with the last monetary policy statement in which SBP stated that its priority is to promote economic growth and investment, especially for the private sector, even if it means that full year inflation target may be missed, which according to some analysts had raised serious concerns.