KARACHI — The Pakistan Stock Exchange (PSX) suffered a sharp blow on Thursday as the KSE-100 index plunged by 1,500 points, triggered by rising geopolitical tensions between Pakistan and India following the deadly terrorist attack in Pahalgam, Indian-occupied Kashmir.
The market opened in the red as investor confidence took a hit from aggressive diplomatic statements issued by New Delhi in response to the April 22 attack, which left 26 tourists dead and several others injured. Market analysts say fears of regional instability between the two nuclear-armed neighbors have overshadowed otherwise strong corporate earnings.
Investor sentiment was further dampened by concerns over the broader economic outlook. Although Pakistan’s recent macroeconomic indicators — including record low inflation, a current account surplus, and a stable real effective exchange rate — had initially boosted optimism, the deteriorating political climate has reversed the trend.
Adding to investor anxiety were the recent assessments from international financial institutions. The International Monetary Fund (IMF) and the World Bank have downgraded Pakistan’s economic growth forecast for the current fiscal year, while inflation is now projected to rise to 7.7% by the end of the next fiscal cycle.
In its latest outlook, Fitch Ratings also warned of further depreciation of the Pakistani rupee, forecasting a possible decline to Rs 285 per US dollar by June, and potentially Rs 295 by the end of the fiscal year. Local analysts, however, offered slightly more conservative estimates, expecting the rupee to stabilize around Rs 283.
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Market watchers now turn their attention to the State Bank of Pakistan’s upcoming monetary policy decision in early May, as well as developments in Pakistan-India relations, both of which are expected to play a crucial role in determining future market direction.
Despite Thursday’s plunge, experts say a de-escalation in tensions or positive signals from the central bank could help stabilize the market in the coming weeks.
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