The Pakistan Stock Exchange (PSX) experienced yet another wave of selling pressure on Monday, with the benchmark KSE-100 Index losing over 600 points in intraday trading. The bearish trend continued to dominate the bourse as uncertainty around the federal budget and ongoing discussions with the International Monetary Fund (IMF) spooked investors.
The KSE-100 index dipped by 886.10 points, or 0.74%, to reach 118,216.57 at 1:13 pm, down from the previous close of 119,102.67. By 3:04 pm, the index had trimmed some losses but was still down by 642.92 points, or 0.54%, reflecting the fragile investor sentiment amid fiscal and policy uncertainty.
Market analysts attributed the drop primarily to the government’s decision to delay the federal budget announcement from June 2 to June 10. According to Mohammed Sohail, CEO of Topline Securities, the delay has heightened investor caution. He noted that “lack of clarity on IMF conditions related to the budget is pushing investors to trim their exposure.”
This sentiment was echoed by Yousuf M. Farooq, Director of Research at Chase Securities, who said the market was in consolidation mode ahead of the budget. He pointed to the oil sector being under pressure following reports of disagreements between the government and IMF regarding the circular debt resolution plan. Farooq also mentioned that the current rollover week further contributed to selling pressure. However, he maintained a cautiously optimistic outlook, stating, “We expect a rerating to the upside once there is clarity on key budgetary measures.”
The delay in budget presentation stems from inconclusive discussions with the IMF on key fiscal and taxation matters. Sources suggest that the visiting IMF mission has held several meetings, including a wrap-up session with Finance Minister Muhammad Aurangzeb, but no final agreement has been reached. These unresolved issues have left investors in a holding pattern, awaiting definitive policy signals before re-entering the market with confidence.
Awais Ashraf, Director of Research at AKD Securities, highlighted investor concerns about the delayed release of circular debt payments to energy companies. He also noted possible changes in tariff structures as part of the upcoming budget. Despite the concerns, Ashraf pointed to a slightly positive development: a reduction in the primary surplus target to 1.6% of GDP, down from 2.1% last year. This adjustment, he said, could offer the government some fiscal breathing room to avoid introducing harsh new taxes.
Ashraf further stated that while significant relief may not be feasible, a more people-centric budget is expected, with continued emphasis on implementing the comprehensive tax reforms initiated under the IMF programme over the past two years.
The recent market correction follows Friday’s session, when the PSX closed the week in the red due to selling pressure fueled by concerns over an IMF-driven federal budget. This marked a shift in sentiment compared to the previous week, when the index had rallied by 12,474 points following a US-brokered ceasefire between two regional powers. However, as budget day nears, investor enthusiasm has cooled, with many opting to stay on the sidelines until fiscal clarity emerges.
In the absence of concrete policy direction, volatility is likely to persist at the PSX. Market participants will closely monitor the evolving negotiations with the IMF and any fiscal signals leading up to the June 10 budget announcement.