By Staff Reporter
KARACHI: Stocks plunged more than 4 percent on Tuesday, posting their biggest single-day drop in history, as investors dumped shares amid political uncertainty and reports of a possible IMF intervention in the country’s circular debt crisis.
The KSE-100 index closed down 2,534 points, or 4.11 percent, at 59,171 points, its lowest level since November 23. The index has lost 11 percent since hitting a record high of 66,427 points on December 12.
“The market is in a panic mode as there is no clarity on the political front and the economic situation,” said Faran Rizvi, head of equity sales at JS Global.
He said unconfirmed reports that the International Monetary Fund (IMF) had rejected the government’s plan to clear the circular debt in the energy sector through non-cash adjustments had also spooked the market.
The circular debt, which stood at Rs2.31 trillion as of June, is seen as a major drag on the economy and a threat to the stability of the power sector.
Rizvi said the index could find some support at 58,500 points level, but added that the market would remain volatile until the political situation improved.
The South Asian country is set to hold general elections in February 2024, but the imprisonment of former prime minister Imran Khan and a crackdown on his party have created political uncertainty.
Analysts are of the view that Pakistan’s political and economic stability depends on “free and fair elections”.
Mohammed Sohail, chief executive of Topline Securities, said the market was undergoing a “much needed” correction after a stellar rally this year, which saw the index gain more than 50 percent and outperform other major asset classes.
He said the sell-off was also driven by year-end profit-taking and margin calls, as some investors had taken leveraged positions in anticipation of further gains.
“The market had become overbought and overvalued, and now it is adjusting to the reality,” Sohail said.
He said the market could bounce back in January, as the earnings season and the announcement of the next fiscal budget could provide some positive triggers.
On Tuesday, all major sectors closed in the red, with banks, oil and gas, cement and auto stocks leading the decline.
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