Karachi, January 28, 2025 – The Pakistan Stock Exchange (PSX) faced significant losses on Tuesday, with its benchmark KSE-100 Index plunging by 2,000 points, as political turbulence in the country fueled investor panic. The steep decline was driven by the breakdown in negotiations between the ruling government and the opposition party, Pakistan Tehreek-e-Insaf (PTI), which has escalated fears of prolonged instability. As a result, investors reacted with widespread sell-offs, putting immense pressure on the market.
The KSE-100 Index dropped to 111,511.16 points during intra-day trading, reflecting a loss of 2,009.16 points, or a 1.77% decrease. The sell-off affected several major sectors, particularly those reliant on domestic and international economic stability. Shares of oil and gas exploration companies, power generation firms, refineries, and commercial banks all faced severe declines. Key stocks such as HUBCO, MARI, OGDC, PPL, PSO, SHEL, SSGC, and SNGPL were notably deep in the red, contributing significantly to the market’s downturn.
In addition to the political instability, the market sentiment was further dampened by recent monetary policy decisions by the State Bank of Pakistan (SBP). On Monday, the SBP’s Monetary Policy Committee (MPC) announced a reduction in the country’s key policy rate by 100 basis points, lowering it to 12%. This rate cut marks the sixth consecutive reduction since June 2024, when the policy rate stood at a much higher 22%. While the MPC highlighted that inflation had eased to 4.1% year-on-year in December due to moderate domestic demand and improved supply-side conditions, it also cautioned that core inflation remains elevated. This signals that inflation could slightly rise again in the coming months, adding more uncertainty to the economic outlook.
The PSX had already shown signs of weakness on Monday, with the KSE-100 Index dropping by 1,360 points to close at 113,520.32, underscoring the fragile market environment. While many had anticipated the monetary policy rate cut, investor sentiment remained fragile, reflecting concerns over Pakistan’s political and economic landscape. Despite the SBP’s attempt to ease monetary conditions, the persistence of political unrest has raised doubts about the long-term stability of the economy.
The political deadlock between the government and the PTI has been a major factor in the growing uncertainty. With no immediate resolution in sight, the impasse has increased concerns about the potential for further policy paralysis, which could harm economic growth and investor confidence. This has created a volatile environment at the PSX, where investors are on edge, responding reactively to any news related to the political situation.
The sharp downturn in the stock market on Tuesday underscores the critical link between political stability and investor confidence. As Pakistan navigates its complex political and economic challenges, the performance of the PSX remains a key indicator of market sentiment. The ongoing political crisis, coupled with the uncertainties surrounding future economic policies, continues to put pressure on the stock market.
For investors, the current climate requires caution and vigilance. The interplay between political developments and macroeconomic trends will remain a crucial factor in shaping the market’s future direction. As the PSX attempts to stabilize, market participants are closely monitoring political negotiations and economic indicators, hoping for clearer signals that might offer a path forward.