The Pakistan Stock Exchange (PSX) witnessed significant selling pressure on Monday as investors anxiously awaited the outcome of the Monetary Policy Committee (MPC) meeting later in the day. The benchmark KSE-100 Index experienced a sharp decline, shedding over 1,100 points during intra-day trading. By 2:50 PM, the index stood at 113,761.54 points, reflecting a decrease of 1,118.94 points, or a 0.97% drop.
The market experienced widespread selling across several key sectors, including automobile manufacturers, cement, chemicals, commercial banks, oil and gas exploration companies, oil marketing companies (OMCs), refineries, and power generation firms. Several index-heavy stocks, including HUBCO, SNGP, SSGC, MARI, OGDC, PPL, MCB, MEBL, and UBL, traded in the red, further contributing to the negative sentiment.
Market analysts have largely attributed this downturn to the anticipation surrounding the MPC meeting. According to a note from Intermarket Securities, the consensus among investors is that the committee will announce a 100 basis point (bps) cut to the policy rate, bringing it down to 12%. This expectation is largely based on recent trends, such as the decline in short-term yields seen in the Treasury Bill auction, where yields fell below 11.5% while the current policy rate remains at 13%.
Intermarket Securities also mentioned that a cut larger than 100bps could trigger a positive market reaction. However, after the MPC’s decision, the focus is expected to shift toward the political landscape and the results season, with particular attention on the anticipated large dividends from banks and fertilizer stocks. The market’s cautious sentiment reflects broader uncertainties surrounding the impact of fiscal policy changes and external factors influencing investor confidence.
The previous week saw a mixed performance at the PSX, as investors remained hesitant to take fresh positions due to ongoing uncertainties. One key issue that has affected market sentiment is the amendment to the tax bill regarding non-filers. The changes to the bill have raised concerns among investors, contributing to the overall lack of confidence and resulting in a decline of 391.59 points in the benchmark KSE-100 index, which closed the week at 114,880.49 points.
While the domestic market experienced a slowdown, global market trends also played a role in influencing investor behavior. Internationally, stock futures in the US and Asian markets, excluding China, experienced a downturn. The launch of a free, open-source artificial intelligence model by Chinese startup DeepSeek, which aims to compete with OpenAI’s ChatGPT, sent shockwaves through the tech sector. US stock futures, including Nasdaq Composite futures, fell by 1.8% as of 0158 GMT, and S&P 500 futures dropped by 0.9%.
Meanwhile, Japan’s Nikkei index reversed an initial advance, ending the day down 0.3%. In New Zealand, the equity benchmark slipped by 0.6%, and Singapore’s Straits Times index lost 0.2%. On the other hand, Hong Kong’s Hang Seng index saw a rally, gaining 0.9%, and mainland Chinese blue-chip stocks rose by 0.2%, even after data revealed a surprising contraction in China’s manufacturing sector for the month.
With these global developments in mind, investors at the PSX remain on edge, closely monitoring both domestic and international factors that could influence market trends in the coming weeks. As the MPC decision unfolds, the direction of the stock market will likely depend on the policy rate changes and the subsequent shifts in investor sentiment.