Shares at the Pakistan Stock Exchange (PSX) rebounded early on Tuesday but struggled to maintain their upward momentum, ultimately falling by more than 500 points by the close of the trading session.
The KSE-100 index ended the day down by 533.73 points, or 0.47%, at 113,568.50, compared to the previous day’s closing of 114,102.23.
The market initially saw a positive surge, rising by 990.87 points (0.87%) to 115,093.10 within the first hour of trading. However, this was followed by a slight decline, with the index dropping to 114,723.98 at 12:30 pm, although it was still up by 621.75 points from the previous session’s close.
The dip in the market came despite the State Bank of Pakistan’s decision on Monday to reduce the interest rate by 100 basis points to 11%, surprising analysts who had expected the central bank to maintain its stance given the ongoing tensions with India.
Awais Ashraf, research director at AKD Securities, noted that the market “lost its momentum amid concerns over border tensions with India, which overshadowed the earlier boost from the rate cut.”
In recent days, anxious investors have been scaling back their investments, spooked by the increasing likelihood of military action between Pakistan and India following India’s allegations regarding a deadly attack in Indian-occupied Kashmir.
The April 22 attack in Pahalgam killed 26 people, primarily tourists, making it one of the deadliest assaults in the region in recent years. India quickly pointed to “cross-border linkages” without presenting evidence, a claim Pakistan has strongly denied and called for an independent investigation.
Despite these tensions, Ashraf believes the risk of a full-scale war between the two nuclear-armed nations remains low, largely due to the deterrent effect of their nuclear capabilities. He emphasized that any escalation would have serious repercussions for both countries, especially given their reliance on external financing and short-term debt obligations.
Samiullah Tariq, head of research at Pak Kuwait Investment Company Ltd, also attributed the initial surge in shares to the unexpected rate cut by the State Bank of Pakistan, which exceeded market expectations.
Yesterday, Topline Securities noted that the market had been volatile, falling by 1,036 points early on but recovering strongly in the latter half of the session, mainly driven by the cement sector, as investors anticipated the central bank’s rate cut.
In a related development, international rating agency Moody’s warned on Monday that sustained tensions between India and Pakistan could harm Pakistan’s growth prospects. The agency cautioned that escalating tensions could disrupt Pakistan’s macroeconomic stability and hinder access to foreign funding.
However, Moody’s maintained that India’s macroeconomic conditions were stable, though it noted that increased defense spending could strain India’s fiscal strength and slow its fiscal consolidation.
