Karachi, January 28, 2025 – The Pakistan Stock Exchange (PSX) experienced a sharp decline on Tuesday, with its benchmark KSE-100 Index plummeting by 2,000 points amid heightened political uncertainty. The abrupt halt in negotiations between the government and the major opposition party, Pakistan Tehreek-e-Insaf, has triggered a wave of concern among investors, leading to significant selling pressure at the PSX.
During intra-day trading, the KSE-100 Index hovered at 111,511.16 points, marking a steep drop of 2,009.16 points or 1.77%. The PSX saw substantial sell-offs across various key sectors, including oil and gas exploration companies, power generation, refineries, and commercial banks. Index-heavy stocks such as HUBCO, MARI, OGDC, PPL, PSO, SHEL, SSGC, and SNGPL traded deep in the red, further exacerbating market losses.
The negative sentiment at the PSX was compounded by the State Bank of Pakistan’s (SBP) latest monetary policy decision. The Monetary Policy Committee (MPC) of the SBP announced a reduction in the key policy rate by 100 basis points, bringing it down to 12%. This marks the sixth consecutive rate cut since June 2024, when the policy rate stood at 22%.
“At its meeting today, the MPC decided to cut the policy rate by 100 basis points to 12%, effective from January 28, 2025,” the committee stated in its official announcement on Monday. The MPC highlighted that inflation had been trending downward, reaching 4.1% year-on-year in December, due to moderate domestic demand, improved supply-side dynamics, and a favorable base effect. However, the committee also noted that core inflation remains at an elevated level, and inflation is expected to rise slightly in the coming months after further easing in January.
On Monday, the PSX had already displayed signs of weakness, with the KSE-100 Index losing 1,360 points to close at 113,520.32. Despite anticipation of a rate cut, investor sentiment remained cautious, reflecting underlying concerns about the political and economic landscape.
The ongoing political uncertainty and its impact on economic policies have created volatility at the PSX. The market’s reaction underscores the critical link between political stability and investor confidence. As the PSX struggles to regain stability, market participants are closely monitoring developments in political negotiations and macroeconomic indicators.
The PSX remains a barometer of investor sentiment in Pakistan, and Tuesday’s performance highlights the challenges posed by both domestic political turbulence and external economic pressures. Investors are advised to exercise caution while navigating these volatile market conditions.