He sharp decline in the Pakistan stock market from historic highs reinforces the perception that when the market reaches extreme highs, large capitalists suddenly withdraw capital, causing it to crash, and this has been going on for a long time. 

Due to this situation, the impression is also starting to arise that all this business in the stock market is running on artificial basis and it has nothing to do with the overall economic situation of the country. The index refers to how many shares increased in price and how many shares decreased in price. Stock trading is actually directly related to the country conditions.  If the conditions are stable, investment increases, if they deteriorate, the lack of investment has negative effects on the stock market. Depreciation of rupee and fluctuation of petroleum products also play an important role in this.  For the past few weeks, the stock exchange had seen a record boom. After touching a high of 67,000 points, investors preferred to sell on Monday and Tuesday and capital outflows plunged the market into a deep bear market.  Due to the market crash, investors lost 3 trillion 62 billion rupees, which reduced the total capital of the market from 94 trillion rupees to 90 trillion rupees.  The KSE 100 index fell by 2372 points and the market could not even maintain the 63 thousand points mark. 

According to economists, investors were also affected by fears of a weak government after the elections. Increasing tension in political parties, current account deficit and exclusion of Pakistan Steel Mill from the privatization list are also reasons for the downgrade.  Analysts also predicted a negative impact on share prices in the Pakistan Stock Exchange. During trading, index heavy sectors including automobile assemblers, cement, chemicals, commercial banks, oil and gas exploration companies, OMC pharmaceuticals and refineries saw selling. 

After more than 900 points decline in 100 index, investors had to resort to profit taking. The ups and downs of the stock market continue, according to some experts, there are chances of improvement in the market in the coming days. However, nothing can be taken for granted after Fitch's grading for Pakistan, which has affected our rating. It may be recalled here that the stock market saw a historic boom in recent weeks and on Nov 30, it had crossed the 46 thousand points mark after many months.

According to economic experts, progress  was made in all sectors, which may have happened after the stand-by agreement announced by the IMF. However, they had also warned about the reent positive trend in the market, saying it cannot be taken for granted and the Government must proceed with business-friendly steps so that the boom continues. 

Many an analyst had attributed recent boom to  the investment agreements of billions of dollars in various sectors by the United Arab Emirates, due to which a huge boom took place in the Pakistan Stock Exchange three weeks ago, which broke all previous records of the 100 index and for the first time in the history of the country, the index reached the milestone of 61 thousand points.  The index, on Dec 1 reached 60,730 points. 63% share prices had increased while the value of shares increased by 98 billion 10 crore 14 lakh 24 thousand rupees. 

The total amount of capital became 87 trillion 46 billion 11 crore 45 lakh rupees in the first week of the current month. More boom was seen in the banking sector. Traditionally the sector has been a favorite for foreign investment, with cement, energy and fertilizers also saw big purchases.  Experts had termed that the forecast of the index reaching the level of 75 thousand points with a growth of 30% by December is proving to be encouraging for the market. The morale of the capitalists is rising as the news of financing of one and a half billion dollars expected from multi-donors is circulating which is driving the market graph towards higher. Expectations of receiving the second tranche under the IMF program, positive news like reduction in interest rates and better political situation are also reasons for the increase.

Around the world when stock market points increase, the resources obtained from it are used for economic development and setting up industries etc. Is it not possible for us that the government should ensure the use of capital that is rapidly gained in the stock market for growing new crops and setting up industries so that the country can stand on its feet economically.  Unfortunately, the stock market has started to be considered as a reason for speculation and profiteering. And that aspect needs to be taken care of. It may be recalled here that in the first week of November, the total volume of capital in the market increased to 80 trillion 82 billion 2 crore 67 lakh, 66 crore 6 lakh 49 thousand shares worth 22 billion rupees were traded. 

The investors were on cloud nine when theysaid that the 100 index closed at 55,391 points on the last day of the last business week of November. However, many an analyst believe that Pakistan is in the IMF program and has no choice but structural reforms, moderation in oil prices, gradual restoration of imports and dividends and tight fiscal policy, but capital from the high interest rate bargain stock market can shy away investors which can be detrimental to stock exchange trading and share businesses.  It is argued that with 21 percent interest rate, investors will shy away from investing in the stock market. On the other hand, it is said that the country is gradually moving on the path of economic recovery and in coming months the situation will improve and the current slump is only temporary.

However, it is unfortunate to see that  it  the stock exchange has returned to negative trading. There is no denying that a stock exchange or stock market is a reflection of the economic activities and economic situation of any country.

Published in The Daily National Courier, December, 23 2023

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