KARACHI, March 18, 2025 – The Pakistan Stock Exchange (PSX) witnessed a sharp decline on Monday, with the benchmark KSE-100 Index falling by 2,002.55 points (-1.69%), closing at 116,439.62. The day’s trading saw a high of 118,797.70, but the index plummeted to a low of 116,257.51, reflecting a total intraday decline of 2,184.66 points (-1.84%) from the previous close of 118,442.17.
Key Factors Behind the Market Slump
Market analysts attribute the downturn to three main factors:
- Cement Sector Pressures: Investor sentiment was rattled after reports emerged that the Khyber Pakhtunkhwa (KP) government is increasing royalty charges on the cement sector, leading to a sell-off in cement stocks.
- Low Trading Volumes Ahead of Eid: With Eid ul Fitr holidays approaching, investors are reluctant to make large commitments, contributing to thin market participation.
- Rollover Week Volatility: The futures rollover period intensified market pressure, as investors squared off positions ahead of settlement deadlines.
Macroeconomic Developments Impacting Market Sentiment
The PSX’s downward trajectory comes after a strong rally last week, fueled by optimism over IMF negotiations and potential energy sector reforms. However, recent setbacks have dented investor confidence:
- IMF Rejection of Tax Cuts in Real Estate Sector: The International Monetary Fund (IMF) has reportedly rejected Pakistan’s request to lower transaction taxes for property sector investments, contrary to earlier government claims that an agreement had been reached.
- Refusal to Reduce Taxes on Tobacco & Beverages: The IMF has also declined requests to cut tax rates in the tobacco and beverage sectors.
- Wheat Procurement Restrictions: The Fund is demanding written assurances from Pakistan that provincial governments will not engage in wheat procurement, a condition for securing the $7 billion Extended Fund Facility (EFF).
Government’s Response & Economic Outlook
Despite these hurdles, Finance Minister Muhammad Aurangzeb remains optimistic, stating that negotiations with the IMF are in the final stages with no major obstacles. He reiterated the government’s commitment to fiscal discipline and economic reforms.
Meanwhile, some macroeconomic indicators show positive trends:
- The Sensitive Price Index (SPI), a key inflation tracker, recorded a 0.35% week-on-week decline for the period ending March 20, signaling easing inflationary pressures.
Market Performance & Outlook
Monday’s 2,000-point drop follows Friday’s 327.60-point decline (-0.28%), which ended a six-day winning streak. With ongoing IMF negotiations, Eid-driven low volumes, and sectoral pressures, analysts expect continued volatility in the near term.
