The stock market received a battering on Thursday as it nosedived over 900 points in a correction phase following a prolonged rally and in the wake of expectations that the central bank would maintain status quo in the upcoming monetary policy.
The bearish phase wiped off some of the gains made in the previous sessions during which the KSE-100 index accumulated nearly 10,000 points, according to Arif Habib Limited.
In addition to that, the auction of treasury bills on Wednesday saw yields remain close to the policy rate of 13.25%, which dashed hopes for any reduction in the key policy rate.
State Bank of Pakistan Governor Dr Reza Baqir had signalled earlier this week that status quo would be maintained in the monetary policy, silencing market talk of expected reduction in the policy rate.
Earlier, trading began on a negative note and the KSE-100 index fell steadily throughout the day. Selling pressure was largely evident as all index-heavy sectors recorded losses. The bourse failed to keep the 38,000-point level and closed just above 37,100 points.
At close, the benchmark KSE 100-share Index recorded a decrease of 936.37 points, or 2.46%, to settle at 37,101.31.
Talking to The Express Tribune, Arif Habib Limited Head of Research Samiullah Tariq said the market was undergoing a correction phase because in the past few days it had risen exceptionally, therefore, a correction was anticipated sooner or later.
"Moreover, the axle load condition for heavy vehicles is in the headlines once again and if implemented it will have a negative impact on certain sectors, hence, stocks of those sectors sparked selling pressure," he added.
On the other hand, the yields of treasury bills in an auction held late on Wednesday remained higher which, according to the analyst, dented investors' sentiment as they had anticipated a monetary easing.
"However, the plunge in the KSE-100 index did not emerge from speculation over the monetary policy," the analyst clarified.
JS Global analyst Maaz Mulla said equities nosedived with the benchmark KSE-100 index shedding 936 points and closing at 37,101, down 2.5%.
The market came under pressure as the treasury bills auction (three-month and one-year) saw the yields rise, which suggested that the State Bank might maintain status quo in Friday's Monetary Policy Committee meeting.
The financial sector was the major laggard, where Meezan Bank (-5%) and NBP (-5%) closed at their respective lower circuit.
In the exploration and production sector, Pakistan Petroleum (-2.4%), Pakistan Oilfields (-2.4%) and Oil and Gas Development Company (-1.3%) lost ground.
Engro (-2.5%) and Fauji Fertiliser (-2.1%) in the fertiliser sector closed in the red zone, adding to pressure on the index.
In the cement sector, DG Khan Cement (-5%) and Kohat Cement (-5%) hit their lower circuits and Lucky Cement (-4.6%) also dropped sharply.
Traded value stood at $52 million, down 29% and volumes came in at 232 million shares, also down 29%. Major contribution to the total market volume came from K-Electric, Pak Elektron, TRG Pakistan and The Bank of Punjab.
"Moving ahead, we expect the market to remain under pressure," the analyst added.
Overall, trading volumes decreased to 232.6 million shares compared with Wednesday's tally of 327.6 million. The value of shares traded during the day was Rs8.1 billion.
Shares of 384 companies were traded. At the end of the day, 69 stocks closed higher, 304 declined and 11 remained unchanged.
K-Electric was the volume leader with 12.1 million shares, losing Rs0.15 to close at Rs4. It was followed by Pak Elektron with 10.3 million shares, losing Rs1.12 to close at Rs22.39 and TRG Pakistan with 9.5 million shares, losing Rs1.15 to close at Rs21.85.
Foreign institutional investors were net buyers of Rs281 million worth of shares during the trading session, according to data compiled by the National Clearing Company of Pakistan.