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Bears firmly gripped the Pakistan Stock Exchange (PSX) on Monday, reversing the morning’s short-lived optimism into sharp losses by the session’s close.
Rising tensions between Pakistan and India, along with market instability, caused the PSX to drop by over 1,400 points.
At the start of the trading day, the benchmark KSE-100 index showed early strength, rising by 941.79 points (0.82%) to 116,411.13 from the previous close of 115,469.34 by 10:05 AM. However, this momentum quickly faltered.
By 3:03 PM, selling pressure intensified, and the index fell by 969.19 points (0.84%) to 114,500.15. The downward trend continued until the market closed at 114,063.90 — a steep decline of 1,405.44 points or 1.22% compared to the last session.
Awais Ashraf, Director of Research at AKD Securities, attributed the day’s volatility to corporate earnings announcements. “Corporate results of heavyweight companies caused the index to fluctuate in today’s trading session,” he explained. Ashraf also pointed out that investor caution prevailed amid rising tensions between Pakistan and India.
Echoing similar concerns, Mohammed Sohail, Chief Executive of Topline Securities, noted,
“Though some buying was seen in the morning session amid no major development on the Pak-India front, investors remained cautious fearing that coming few days seem crucial in the ongoing tension between the two neighbours.”
Yousuf M. Farooq, Director of Research at Chase Securities, described the session’s movement: “The market opened slightly higher today and then pulled back as initial excitement faded.”
Positive Indicators Temper Sentiment
Despite the heavy losses, some positive factors provided slight reassurance to market participants. Farooq highlighted that no major escalation had occurred between India and Pakistan over the weekend following the Pahalgam attack. He also pointed out that Pakistan’s monthly current account was in a “comfortable position” and corporate earnings had remained strong.
Adding to the optimistic signals, Farooq noted that inflation had dropped to record-low levels, and the real effective exchange rate (REER) stood at 101.
He further stated,
“With most market participants expecting interest rate cuts ahead, there is potential for a rerating of the market’s PE [price-to-earnings] multiple.”
However, he cautioned,
“A significant upward move will likely require de-escalation between India and Pakistan.”
Geopolitical Backdrop
The latest market downturn follows a string of tense developments between the two nuclear-armed neighbours. Last week’s deadly attack in Pahalgam, which left 26 people dead, most of them tourists, marked the deadliest such assault in the disputed Himalayan region since 2000.
In the wake of the attack, India unilaterally suspended the critical Indus Waters Treaty (IWT), a move that prompted Pakistan to threaten to put the Simla Agreement in abeyance and consider closing its airspace to Indian flights.
AKD Securities emphasized that escalating geopolitical tensions, particularly after the Pahalgam incident and India’s suspension of the IWT, had severely undermined investor sentiment and triggered volatility throughout the previous week.
