PSX ends in red as profit-taking overshadows economic optimism

The capital market closed in the red on Tuesday, with investors navigating a mix of caution following recent volatility and optimism driven by improving macroeconomic indicators. 

Buoyed initially by political stability and supportive monetary policies, the market’s positive start was soon tempered by waves of profit-taking, leading to fluctuating performance throughout the day.

The Pakistan Stock Exchange’s (PSX) bencmark KSE-100 Index initially climbed 1,112.08 points, or 0.98%, to reach an intraday high of 115,036.49, showcasing renewed investor confidence. 

However, the index faced significant downward pressure, dropping to an intraday low of 112,294.42 before closing at 112,414.80, marking a decline of 1,509.61 points, or -1.33%, from the previous close of 113,924.41.

“Profit-taking after yesterday’s increase is weighing on the market,” said Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company.

The long-expected dialogue between the PTI and the government, within the atmosphere of constructive interaction, contributed to political stability-easing concerns in the business circles. The recent State Bank of Pakistan policy rate cut of 200 bps to 13%, is still supporting the market activity backdrop through the ease of financing costs and economic prospects.

The highest current account surplus in a decade, coming at $729 million for November, has also contributed towards the improving economic sentiment. This is significant when compared with the deficit amounting to $148 million recorded in the same month last year and a surplus for the fourth successive month.

The country’s power generation grew 6% YoY in November to 8,032GWh, reflecting a gradual recovery in industrial activity. The government also raised Rs382 billion through Pakistan Investment Bonds with cut-off yields sliding by as much as 55bps across tenors, reflecting strong demand for long-term government securities.

FDI increased significantly with inflows rising to $219 million in November, up 65% month-on-month and 27% year-on-year. The country has received a total of $1.13 billion FDI in the first five months of FY25, which is up 112% compared to the same period last year.

Finance Minister Muhammad Aurangzeb moved the Tax Laws Amendment Bill, 2023, which has advocated for stern actions against the non-filers by banning the purchase of above 800cc vehicles, property, and shares. The law provides powers to the Federal Board of Revenue (FBR) to freeze bank accounts and block the transfer of the property of such people.

However, FBR Chairman Rashid Langrial cleared the air, stating that there would be no increase in the rate of tax, as it would not help achieve the desired revenue targets. Speaking on Geo News’ programme ‘Naya Pakistan’, the FBR chairman acknowledged that there is a revenue leakage of Rs1,200 billion in the income tax sector alone, as the top 1% earners in the country were under filing.

The stock market outperformed traditional avenues of investment like bonds, gold, and the US dollar in 2024, a report by Topline Securities notes, due largely to economic reforms under the IMF programme and a reduction in the rate of interest channelled into the equity market.

Despite the mixed trend seen on Tuesday, PSX continues to remain attractive for investors owing to attractive valuations and improvement in economic fundamentals.