Stocks fell for a second session on Thursday, hovering below 89,000 points, as a massive correction halted a multi-day rally fueled mainly by expectations that the central bank was set to extend its hawkish monetary policy on the 4th. november.

The Pakistan Stock Exchange’s stock benchmark KSE-100 index lost 1,319.80 points or 1.46 per cent to hit a low of 88,966.76 points against the previous close of 90,286.56 points .

Analysts blame institutional profit-taking linked to overbought scripts as the main reason for this downward spiral which began on Wednesday.

Brokerage firm Arif Habib Limited (AHL) said in a note that the KSE-100 index jumped 9.7% (+7,853 points) on a monthly basis in October 2024, closing at 88,967 points – its highest monthly return since November 2023.

Topline Securities, in its daily market report, said the recent rally was driven by expectations of a policy rate cut.

“However, a decline in Treasury yields (market treasuries) in Wednesday’s auction spurred profit-taking, reflecting a classic ‘buy on rumors, sell on news’ pattern,” Topline Research analysts reported.

Treasury bond yields have fallen as investors are wary of October inflation figures and the State Bank of Pakistan’s (SBP) upcoming monetary policy meeting.

The yield on three-month Treasury bills fell 140 basis points (bps) to 13.8998 percent. The yield on six-month Treasury bills fell 84 basis points to 13.5 percent. The 12-month paper yield fell 64 basis points to 13.0997 percent.

In today’s session, the top companies in terms of value traded were Sazgar Engineering Works Limited (2.15 billion rupees), Pakistan State Oil Limited (1.83 billion rupees), Attock Refinery Limited (1 .57 billion rupees), Pakistan Petroleum Limited (1.22 billion rupees). billion), and TRG Pakistan Limited (Rs995 million).

“Above-average activity at Sazgar Engineering Works Limited can be attributed to spread/arbitrage trading, with around Rs 2.5 billion recorded in its November futures contract,” the brokerage report said.

On the one-off front, the major laggards for the day were the banking and fertilizer sectors with MCB Bank Limited, Habib Bank Limited, Meezan Bank Limited, Engro Corporation Limited and Engro Fertilizers Limited together pushing the index down to 551 points.

The average trading volume and value for the day stood at 546 million shares and Rs 24 billion, respectively, while K-Electric Limited led the volume with 73.6 million shares.

Samiullah Tariq, group head of research and product development at Pakistan Kuwait Investment Company (Private) Limited (PKIC), noted that the market was experiencing an expected pause.

“Such corrections are typical in financial markets, allowing consolidation ahead of possible future gains,” Tariq added.

Additionally, foreign capital outflows, rising tariffs on industrial gas, rupee instability and concerns over the outcome of Saudi investors seeking guarantees on stable government policies for a $2 billion investment also dented sentiment.

Commenting on the fall, Ahsan Mehanti of Arif Habib Corp said stocks fell sharply due to institutional profit-taking as the earnings season drew to a close after many robust corporate financial results announcements by various majors. names.

“Instability in the rupee and uncertainty over the SBP’s policy rate decision ahead of the International Monetary Fund’s first assessment of the extended financing facility weighed on stocks,” Mehanti added.

On Wednesday, the rupee weakened for a third consecutive session due to persistent demand for dollars from importers, closing at 277.79 per dollar in the interbank market.

The financial market expects the SBP to cut its policy rate by up to 200 basis points at its next meeting on November 4.

If implemented, it would be the fourth consecutive rate cut since June, driven by falling inflation, a narrowing current account deficit and increased remittances from migrant workers.