PSX sees biggest single-day decline, plummets over 3,700 points

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The Pakistan Stock Exchange (PSX) faced a sharp decline today, with the KSE 100 Index falling by 3.3%, bringing the index down to 111,070.29 points.

The KSE-100 Index began the day on a positive note, rising by 1,376.02 points, or 1.2%, to reach an intraday high of 116,236.7.

However, the market experienced a sharp reversal, plummeting to an intraday low of 110,896.27. The index eventually closed at 111,070.29, reflecting a historic single-day drop of 3,790.39 points, or 3.3%.

The volume of shares traded amounted to over 506 million, valued at approximately 45.7 billion Pakistani rupees.

The significant drop in the market, driven by various economic and political factors, has raised concerns among investors. The trading suspension offers a temporary reprieve as investors wait for further developments.

SBP slashes policy rate

The State Bank of Pakistan (SBP) maintained on Monday its strategy of a gradual interest rate cut, slashing the policy rate by 200 basis points to 13% on the back of a decline in headline inflation, which plummeted to 4.9% in November, as well as improved growth prospects in the economy.

The rate cut, announced by the Monetary Policy Committee (MPC), effective December 17, 2024, is the fifth consecutive rate cut in the ongoing monetary easing cycle. The latest cut brings the total reduction during the current year to a historic 900bps.

The decision is driven by a fall in headline inflation, which dropped to 4.9% year-on-year in November, as well as improved growth prospects in the economy. However, core inflation remained persistent, and the SBP had emphasised that further policy actions would depend on evolving economic data.

"The Monetary Policy Committee (MPC) decided to cut the policy rate by 200 bps to 13 percent, effective from December 17, 2024," said the MPC said in a statement. It added that the headline inflation fell in line with the MPC's expectations.

Analysts said the deceleration was mainly driven by the continued decline in food inflation as well as the phasing out of the impact of the gas tariffs hike in November. "[It's] an unprecedented monetary easing in CY24, with a cumulative 900bps rate cut over the year," Tahir Abbas, the Director Equities, AHL said.

However, the MPC noted that the core inflation – at 9.7 – was proving to be sticky, whereas inflation expectations of consumers and businesses remained volatile. It was projected to average around 8-9% in the coming months and likely to slow the pace of further policy rate cuts.