KARACHI

The benchmark KSE 100-index fell to year’s lowest level on Monday as stocks suffered heavy decline, with the KSE-100 index posting a loss of 474.18 points or 1.44 per cent to close at 32,454.91 points due to foreign selling.

The market opened the week on a negative note as fear of continued foreign selling spooked local investors. Last week’s total foreign portfolio outflow of over $28m left everyone guessing on when the selling would abate. Even though the market has a lot of positive triggers to look ahead to including the monetary policy statement on 21st March, investors were caught on the back foot by consistent selling by international investors. This could potentially be attributed to the important meeting of the US Federal Reserve which starts on Tuesday and is likely to provide guidance on when eventually interest rates are raised in the US, observed analyst Ovais Ahsan.

A rise in rates in the US entails repatriation of “hot money” flows from risk assets, but it would be incorrect to say that this phenomena has just started recently as emerging market funds have been facing redemptions for quite some time in anticipation. The banking sector faced selling pressure as UBL went down by 2.54% and NBP 1.21% in anticipation of a rate cut of up to 50bps in this week’s monetary policy.

The proposed introduction of a target rate by the State Bank for controlling money market overnight rates is expected to effectively bring down the reference policy rate which is also being seen as a negative for banks as it will further squeeze their spreads, the analyst stated.

After some recovery on Friday, market continues its downward trend due to selling by foreign investors. On Monday, benchmark 100-index fell 1.4% to reach year’s lowest level. Interestingly now the market has lost almost all the gains of 2015. It is now close to the levels seen at year-end.

The current bearish trend is mainly due to USD93m net foreign selling so far this year though overall economic, political and corporate news are good.

Oil sector fell in line with falling global oil prices. Index heavyweight OGDC was down 2.5%, PPL 2.3%, POL 1.8% and PSO 2%, commented Samar Iqbal VP at Topline brokerage. Huge selling was seen in Engro Corp that fell 4.7% affecting overall market sentiments

Compared to year to date average daily volume of 248n shares, yesterday’s volume was 120m shares. Similarly, value traded also stood low at Rs7b/ $71m versus year to date average of Rs14b/$140m.