PTBP Web Desk

The Pakistan Stock Exchange (PSX) saw a turbulent trading session on Tuesday, following an anticipated policy rate cut by the State Bank of Pakistan (SBP). Despite a minor positive start, the benchmark KSE-100 index plummeted, losing over 600 points during the day’s trading.
At 1:35 PM, the benchmark index was at 72,586.10 points, marking a decrease of 666.46 points or 0.91%. This sharp decline was attributed to widespread selling across various sectors, including commercial banks, fertilizer, oil and gas exploration companies, oil marketing companies (OMCs), refineries, and construction sectors. Notable index-heavy stocks such as Oil and Gas Development Company (OGDC), Pakistan Petroleum Limited (PPL), Shell Pakistan Limited (SHEL), Sui Northern Gas Pipelines Limited (SNGPL), Pakistan Refinery Limited (PRL), Habib Bank Limited (HBL), MCB Bank Limited (MCB), and Meezan Bank Limited (MEBL) all saw significant declines.
The market’s downturn comes amidst growing uncertainty among market stakeholders regarding the upcoming budget for the fiscal year 2024-25, which is scheduled to be presented on Wednesday. Concerns over potential negative measures to be introduced in the budget have added to the market’s anxiety, leading to a cautious trading environment.
On Monday, the State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) made a significant decision to reduce the key policy rate by 150 basis points, bringing it down to 20.5%, effective from June 11, 2024. This decision marked the first cut in the key policy rate in four years, with the last reduction occurring in June 2020 during the COVID-19 pandemic. Since then, the interest rate had gradually increased from 7% to a record high of 22%, where it remained for almost a year.
In its statement, the MPC noted that the significant decline in inflation since February was broadly in line with expectations, but the May outturn was better than anticipated. “The MPC assessed that underlying inflationary pressures are also subsiding amidst a tight monetary policy stance, supported by fiscal consolidation,” the statement read.
Despite the market initially factoring in the rate cut, the expected move was overshadowed by rumors of potential harsh measures in the forthcoming budget. Analysts speculate that the government might introduce stringent tax measures targeting the formal sector, further fueling market apprehension.
Monday’s trading session had already set a negative tone, with the benchmark KSE-100 index losing over 500 points, settling at 73,252.56. This trend continued into Tuesday, reflecting the market’s ongoing uncertainty and cautious sentiment.
The global market environment also contributed to the cautious mood. Asian stocks exhibited guarded behavior on Tuesday as investors weighed fresh political uncertainties in European markets. Right-wing gains in elections and a snap poll in France revived concerns about the cohesion of the European Union. The MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.5% in thin trade, with Chinese blue chips falling 1.2%, further impacting investor sentiment.