PSX faces setback over political uncertainty

Cautious rate cut, weak oil sector results pull index down by 1,490 points

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KARACHI:

Pakistan Stock Exchange (PSX) on Tuesday came under pressure and registered hefty losses as the benchmark KSE-100 index dropped nearly 1,500 points, extending its downturn from the previous day.

Analysts attributed the bearish trend to the State Bank of Pakistan's (SBP) cautious policy rate cut, high core inflation and mounting economic risks.

Adding to the negative sentiment included poor financial results from key oil sector players, ongoing gas reforms and uncertainty surrounding talks between the government and Pakistan Tehreek-e-Insaf (PTI). Additionally, the rollover of January positions contributed to the decline. The index hit the intra-day low of 111,435 points before closing at 112,030.

Despite the downtrend, analysts saw a positive outlook, drawn from the State Bank's rate cut, which may buoy investor sentiment.

Ahsan Mehanti of Arif Habib Corp commented that stocks closed bearish after the SBP's cautious rate cut decision amid high core inflation and evolving risks.

He added that dismal financial results in the oil sector, gas reforms having impact on industries, rupee instability and uncertainty about the outcome of talks between the government and PTI played the role of catalysts in bearish activity at the PSX.

At the end of trading, the benchmark KSE-100 index recorded a slump of 1,489.96 points, or 1.31%, and settled at 112,030.36.

In its review, Topline Securities stated that the market saw a decline, with the index dropping to the intra-day low of 111,435 before closing at 112,030. The negative sentiment was driven by January rollovers and weaker-than-expected corporate results, putting additional pressure on the bourse, it noted.

Key stocks contributing to the decline included Fauji Fertiliser Company, Engro Holdings, Systems Limited, Mari Petroleum and Oil and Gas Development Company (OGDC), which together caused a drop of 826 points, Topline added.

In its report, Arif Habib Limited (AHL) observed that Tuesday marked another aggressive move lower for the KSE-100, to the bottom of the current range.

Some 20 shares rose while 74 fell with UBL (+0.54%), The Searle Company (+2.18%) and Lucky Cement (+2.61%) contributing the most to index gains. On the other hand, Fauji Fertiliser Co (-2.68%), Systems Limited (-4.02%) and Mari Petroleum (-2.98%) were the biggest drags, it stated.

Lucky Core Industries announced 1HFY25 earnings per share (EPS) of Rs68.23, a 25% year-on-year growth amid higher gross margins and elevated other income. On a quarterly basis, the EPS for 2QFY25 came in at Rs39.82, up 47% year-on-year.

In addition, the company announced an interim cash dividend of Rs34 per share for 2QFY25 (Rs27/share for 2QFY24), AHL mentioned.

"KSE-100 needs a strong rally to keep the range intact; failure of which could trigger additional downside. Next few sessions are important to determine market direction for coming weeks," it added.

JS Global analyst Muhammad Hasan Ather commented that the KSE-100 index registered a significant drop amid political uncertainty sparked by the halt to negotiations between the government and the opposition.

Ather noted that sell-off spread across key sectors like E&P, OMCs and banks. Despite this, a positive outlook can be drawn from the State Bank's rate cut to 12%, which might foster improved market conditions.

Overall trading volumes increased to 517.8 million shares compared with Monday's tally of 494 million. Shares of 438 companies were traded. Of these, 95 stocks closed higher, 280 fell and 63 remained unchanged.

WorldCall Telecom was the volume leader with trading in 67.9 million shares, falling Rs0.04 to close at Rs1.69. It was followed by Sui Southern Gas Company with 29.5 million shares, falling Rs1.39 to close at Rs38.14 and Cnergyico PK with 28.4 million shares, falling Rs0.21 to close at Rs7.36.

During the day, foreign investors bought shares worth Rs337.6 million, the National Clearing Company of Pakistan reported.