Islamabad: The Pakistan stock market experienced significant volatility this past week, heavily influenced by ongoing political uncertainties. This tumultuous environment led to a substantial drop in the benchmark index, which fell by 2,088 points, a 2.61% decline, closing at 78,029 points.

According to AKD Securities Limited, amidst the fluctuations, Pakistan's financial strategy remains under intense scrutiny. With the country's agenda not yet scheduled for the IMF board meeting, authorities are actively pursuing other external financing options. This includes a delegation's current visit to China, discussing potential debt rescheduling, particularly for power producers. The Finance Minister's engagement with international rating agencies like Fitch and Moody's is also a part of efforts to possibly enhance Pakistan’s credit rating, which could aid in raising capital from external sources.

The domestic financial market hinted at optimism during the last Treasury bill auction, where yields fell by 30-56 basis points. This suggests that the market anticipates a 50-100 basis points reduction in the upcoming Monetary Policy Committee (MPC) meeting on Monday. However, experts forecast that the MPC will likely maintain the current rates due to renewed inflationary pressures stemming from food supply disruptions and recent tax measures introduced in the FY25 budget. Expected inflation for July 2024 is projected to reach 10.96% year-over-year, down from 12.57% in the previous month.

Further financial strains were evident as the State Bank of Pakistan’s foreign exchange reserves decreased by US$397 million over the week, settling at US$9.03 billion as of July 19, 2024. In the trading sphere, market participation saw a decline of 27.3% week-over-week, with average daily traded volumes dropping to 337 million shares from 464 million shares the previous week. The Pakistani Rupee largely stabilized against the US dollar, ending the week at 278.3.

Sectoral analysis revealed that Leasing companies, Vanaspati & allied industries, and Textile spinning sectors led the market gains, whereas ETFs, Investment Banks/Companies, and Jute sectors faced the steepest declines. In terms of investment flows, mutual funds recorded a net sell of US$5.0 million, whereas foreign investors and insurance companies countered with net purchases of US$4.6 million and US$4.4 million, respectively.