KARACHI: Shares at the Karachi stock market came crashing down on Monday, with the KSE-100 index posting a massive loss of 1,023.94 points (3.05pc).

The index settled at 32,506.36 points after Rs192 billion was wiped off the market capitalisation. The bloodbath saw more than 50 stocks drop to the maximum permissible per-scrip daily loss of 5 per cent.

Most market players blamed mutual funds as the major spoiler of investor sentiments, as they sold $16.72m worth stocks to cushion their ‘Capital Protected Funds’.

There were also reports of some large-scale redemption. Investors were also spooked by the possibility of foreign selling which pulled the market down in March causing a widespread loss to small investors.

But the figures released by the National Clearing Company of Pakistan Limited (NCCPL) showed that foreign sale was minimal at net $0.26m. The other major reasons that fuelled the bearish fire at the market were the reports that the National Accountability Bureau (NAB) was geared to begin work on 16 cases referred to it by the Securities and Exchange Commission of Pakistan (SECP).

Yet, most heavily traded stocks touched their ‘lower circuit’ including PAEL, Lucky Cement, Engro Corporation, PTCL, Fauji Cement, Maple Leaf Cement, DG Khan Cement and Engro Foods.Panic gripped the market and the benchmark index took a steep dive to an intra-day loss of 1,114 points, though it managed to claw up a bit by the close as major brokers were able to calm the market.

A stockbroker said, “Supreme Court’s decision to suspend election tribunal’s decision to unseat Railway Minister Saad Rafique did help restore some sanity in the market, but the index resumed the downward journey on institutional selling.”

Zulqarnain Khan, executive director at Next Capital, commented that a mix of several factors triggered selling at the market, including the high level of the index at which profit taking was expected, political uncertainty and the investors’ nervousness over the upcoming federal budget.

Zubair Ghulam Hussain, head of equity sales at Foundation Securities, concurred that speculations over what the budget may have in store for the market was at the heart of the day’s stock decline.

Investors were particularly eyeing new measures regarding capital gains tax (CGT). Raza Jafri, executive director at Intermarket Securities, thought that after weighing risk/return at the current high index level, investors were already contemplating profit taking and the NAB-SECP issue provided them the trigger.

He reminded that several positive factors were ahead such as possible cut in discount rate and the promotion of KSE from frontier to emerging market, but the immediate worry on investors’ mind was the possibility of new tax measures in the budget. He asserted that even otherwise, in the ongoing month it is a sellers’ market everywhere and in the West they say: “Sell in May and go away”.

An investment analyst at a big brokerage house pointed out that all major sectors saw a sharp decline in stock prices, led by cements, banks and oil and gas. “The heavyweight oil and gas sector took the brunt with HASCOL, PSO, SHEL, POL and BYCO closing down by 5pc, 5pc, 3.9pc, 4.4pc and 6.3pc.”

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