The Pakistan Stock Exchange (PSX) suffered a sharp decline as concerns over the cement sector, low trading volumes, and IMF tax policies rattled investor confidence. The KSE-100 Index dropped 2,002.55 points (-1.69%), closing at 116,439.62, marking a significant downturn at the start of the trading week.
Market Opens Weak Amid Cement Sector Concerns
The day began on a negative note, with the index reaching an intraday high of 118,797.70, before plunging to a low of 116,257.51, a decline of 2,184.66 points (-1.84%) from the previous session’s close of 118,442.17.
According to analysts, the cement sector played a major role in the downturn. News emerged that the Khyber Pakhtunkhwa (KP) government plans to increase royalty charges on cement production, causing cement stocks to fall and dragging the broader market down.
Sana Tawfik, Head of Research at Arif Habib Limited, highlighted three key reasons for the decline:
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Cement sector concerns due to increased royalty charges in KP.
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Low trading volumes ahead of Eid ul Fitr, reducing market activity.
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Rollover week pressures, adding uncertainty to stock movements.
IMF Rejects Property Tax Reduction, Dampens Market Sentiment
Investor confidence took another hit as the International Monetary Fund (IMF) rejected Pakistan’s request to reduce property transaction taxes. Earlier reports suggested an agreement to cut withholding tax on property purchases by 2% from April 1. However, the IMF clarified that no such approval had been granted.
This follows similar refusals from the global lender on tax reductions for the tobacco and beverage sectors. The IMF has also demanded written assurances from Pakistan’s government that provincial authorities will not engage in wheat procurement, a key condition under the $7 billion Extended Fund Facility (EFF).
Read: IMF Approves Tax Cut on Property Purchases in Pakistan
Market Weakness Follows a Strong Rally
The latest decline comes after PSX recorded a strong rally last week, driven by optimism over IMF negotiations and potential energy sector reforms. However, fresh developments over the weekend halted the momentum, triggering the sharp sell-off.
Finance Minister Muhammad Aurangzeb remains optimistic, stating that negotiations with the IMF are in the final stages with no major hurdles. He reassured investors of the government’s commitment to economic reforms and fiscal discipline.
Inflationary Pressures Show Signs of Easing
Despite stock market volatility, macroeconomic indicators offer some relief. The Sensitive Price Index (SPI), which tracks short-term inflation, recorded a 0.35% decline for the week ending March 20. This suggests a gradual easing of inflationary pressures, which could provide some support to market sentiment in the coming weeks.
Market Outlook
The PSX had already shown signs of fatigue on Friday, ending a six-session winning streak with the KSE-100 Index losing 327.60 points (-0.28%). The current downturn raises concerns about market stability, but investors remain hopeful that positive news from the IMF could reverse the negative trend.
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