Already under fire over rising inflation, govt allows massive hike in petrol, diesel prices

ISLAMABAD/ KARACHI: Grappling with inflated electricity bills, the nation witnessed a double whammy of petrol and diesel prices shooting up at midnight and the stock market going down with a loss of 1,242 points earlier in the day.

Close to the midnight, the Finance Division announced increase in the price of petrol by Rs14.91 per litre and high-speed diesel (HSD) by Rs18.44 per litre. The increase brings the price of petrol to Rs305.36 per litre and HSD to Rs311.84 per litre.

The Finance Division said in its notification posted on X (formerly Twitter) the increase in fuel prices was due to the “increasing trend of petroleum prices in the international market and exchange rate variations”.

On August 1, the government had raised the price of petrol by Rs19.95/litre and of high-speed diesel by Rs19.90 per litre. On August 16, the price of petrol and diesel were raised by Rs17.50 per litre and Rs20 per litre respectively.

During the day in a continuous downtrend during the current week, stocks crashed as investors remained concerned over the weakening rupee and economic uncertainty, traders said.

The Pakistan Stock Exchange’s (PSX) benchmark KSE 100-share Index closed lower by 1,242.14 points or 2.69 per cent to 45,002.42 points, against 46,244.56 points, recorded in the last session. The highest index of the day remained at 46,358.02 points, while the lowest level of the day was recorded at 44,459.63 points.

Analyst Ahsan Mehanti at Arif Habib Corp. said, “Stocks fell record low due to economic uncertainty amid a slump in rupee and speculations over likely hike in interest rates on inflation worries.”

He said that caretaker finance minister’s assertion of lack of fiscal capacity to give subsidies or relief on power bills and concerns for unresolved circular debt crisis in the power sector played a catalyst role in the bearish close.

The KSE-30 index decreased by 450.83 points or 2.75 per cent to 15,969.92 points against 16,420.76 points.

Traded shares increased by 87 million shares to 287.356 million shares from 200.292 million shares. The trading value increased to Rs12.303 billion from Rs8.987 billion. Market capital narrowed to Rs6.715 trillion against Rs6.895 trillion. Out of 325 companies active in the session, 48 closed in green, 257 in red and 20 remained unchanged.

Nabeel Haroon, an analyst at Topline Securities, said continuing its momentum KSE 100 Index declined by -2.7 per cent to close at 45,002 level. “This decline in the market can be attributed to investors’ concern with respect to continuous decline in PKR value, hike in electricity prices and gas prices; which investors fear will push State Bank to increase policy rate in upcoming monetary policy announcement on Sept 14.”

The major contribution to the index came from MCB, UBL, HUBC, MEBL and PPL, as they lost value to weigh down on the index by -433 points.

The MSCI quarterly rebalance took place Thursday – where 15 stocks were added to the MSCI FM Index taking the total constituents from Pakistan in the index to 17.

The highest increase was recorded in Sitara Chemical, which rose by Rs15.22 to Rs233.90 per share, followed by Suraj Cotton, which increased by Rs7.63 to Rs109.33 per share. A significant decline was noted in Rafhan MaizeXD, which fell by Rs255 to Rs8,000 per share, followed by Nestle Pakistan, which decreased by Rs188.38 to Rs6,911 per share.

Muhammed Waqar Iqbal, an analyst at JS Research, said that the downtrend continued at the stocks as selling was witnessed across the board. “Going forward, we recommend investors to adopt a buy-on-dips strategy in banks, steel and refinery sectors,” he advised.

WorldCall Telecom remained the volume leader with 31.867 million shares which closed lower by 4 paisas to Rs1.14 per share. It was followed by Oil & Gas Dev. with 17.491 million shares, which closed lower by Rs1.30 to Rs92.95 per share.

Other significant turnover stocks included Cnergyico PK, Pak Refinery, Pak Petroleum, Unity Foods Ltd, SEARLR@, Meezan Bank XD, United Bank and Maple Leaf.

Shares’ turnover in the future contracts increased to 82.716 million shares from 65.599 million shares.

Meanwhile, the Pakistani rupee (PKR) slid to a record low for an eighth consecutive session in the interbank market on Thursday, falling to 305.54 per dollar, data from the State Bank of Pakistan (SBP), showed. The currency lost by 1.09 rupees or 0.36 per cent against the dollar on day-on-day. The PKR closed at 304.45 in the previous session. The rupee was quoted by some traders at 326-327 per dollar in the open market.

However, the local unit, according to rates released by the Exchange Companies Association of Pakistan (ECAP), was traded at 323 for selling versus the dollar, down 3.50 rupees from the previous session.

According to analysts, the rupee has depreciated significantly as a result of ease in import restrictions to comply with terms set under a $3 billion bailout package from the International Monetary Fund, and capital outflows.

Investor sentiment is especially shaky due to forecasts for an increase in the August inflation numbers ahead of the data expected on Friday, Sept 1.

The rupee has fallen 4.6 per cent since the caretaker administration took office. The rupee depreciated 6.2 per cent in August.

Tahir Abbas, the head of research at Arif Habib Limited said one of the main causes of the rupee’s pressure and subsequent rapid decline in recent days is the outflow of dollars.

“Capital has been fleeing Pakistan at a rapid rate,” Abbas said. “Through the unofficial hawala/hundi networks, the need for dollars for capital flight is being satiated. Pakistani expats are compelled to send money through illicit channels due to the increasing gap between interbank and kerb market rates, which has had a negative impact on remittances,” Abbas added. The difference between interbank and open market rates has increased to 7 per cent.

Since luxury imports are also not permitted, financing for these imports is obtained from the grey market. The interbank market is catching the open market rate due to an IMF requirement that the difference in the exchange rates between the interbank and kerb markets should not be above 1.25 per cent, according to Abbas.

“The government needs to crack down on both domestic and foreign hawala/hundi operators,” he said.

Also, amid the upward trend in the international market, gold prices in Pakistan witnessed a big single-day hike on Thursday, while the local currency is sliding to an all-time low. Gold prices saw upward trajectory in Pakistan on Thursday, as the yellow metal increased more than Rs10,000 in a couple of days.

Data shared by the All-Pakistan Sarafa Gems and Jewellers Association shows per tola gold price in Pakistan increased by 3,400, while the price of 10 grams of yellow metal saw an increase of Rs2,915.

With the latest tweak, the price of per tola gold stands at Rs239,400, and 10 grams stand at Rs205,590.

Globally, the prices of yellow metal hovered around $1,945 per ounce while silver remained at $24.56 per ounce.

Gold remained volatile in Pakistan amid continued political and economic uncertainty and soaring inflation, and people prefer to buy bullion in such times as a safe investment.