Bearish sentiment grips PSX as investors eye earnings reports

• KSE-100 Index drops sharply, closing at 112,030.36 points.
• Benchmark index falls 1,489.96 points, a -1.31% decline.
• Market hits intraday low of 111,434.95 points, losing momentum.

Bearish sentiment persisted on the stock market on Tuesday, with investors closely monitoring corporate earnings and the recent monetary policy announcement.

The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index closed at 112,030.36, registering a sharp drop of 1,489.96 points or -1.31% from the previous session's close of 113,520.32. During the session, the index climbed to an intraday high of 113,644.71 but also touched a low of 111,434.95.

"Earnings season has started, and stocks are reactive to earnings and payouts. Disappointment on payouts kept the oil sector under pressure yesterday and caused broader market weakness," Ismail Iqbal Securities CEO Ahfaz Mustafa said.

"This pressure has carried on today as people have become cautious before earnings announcements," he added.

The oil sector faced significant pressure following Monday's underwhelming earnings reports, which weighed on the broader market sentiment.

On Monday, Mari Energies Limited (Mari) reported a 19% year-on-year decline in profitability for H1FY25, posting Rs30,396 million (EPS: Rs25.32), compared to Rs37,505 million (EPS: Rs31.24) in H1FY24. 

The company's quarterly profit also declined by 39% YoY to Rs11,168 million (EPS: Rs9.30), driven by a 115% YoY surge in operating costs and a 15% incremental royalty on the Mari D&P Lease wellhead value, effective November 2024.

A day earlier, the State Bank of Pakistan (SBP) announced a 100-basis-point cut in its key policy rate, reducing it to 12%. This marks the sixth consecutive rate cut since June 2024, as the country aims to revive economic activity and business sentiment amid easing inflation.

SBP Governor Jameel Ahmed noted that inflation is expected to ease further in January, although core inflation remains elevated. The central bank projected full-year inflation to average between 5.5% and 7.5% for the fiscal year ending in June 2025.

In an effort to shield consumers from rising gas tariffs, the government reallocated Rs82 billion from the profits of state-owned Sui gas companies. These funds, initially intended for reducing circular debt, will now be used to prevent a gas tariff hike for ordinary consumers.

"We had allocated Rs100 billion of the companies’ profits for curtailing circular debt," Petroleum Minister Musadik Malik said. "Now, Rs82 billion will be used to ensure ordinary consumers aren’t burdened with higher utility costs."

The market kicked off the week on a negative note, with the KSE-100 Index plunging 1,360.16 points, or 1.18%, to close at 113,520.32. 

The index experienced a high of 115,596.87 and a low of 113,482.23 during the session, driven by weak corporate results and cautious sentiment ahead of the monetary policy announcement.

As the earnings season continues, market participants are expected to remain focused on corporate results and payout expectations.