The benchmark index was hovering around 40,327.26, a drop of 1,039.85 points or 2.51%, near the end of the session with selling witnessed across all sectors.
The decline follows that of Monday's when the benchmark KSE-100 Index lost over 700 points amid renewed political uncertainty after the Punjab by-polls.
On Tuesday, Fitch Ratings agency also downgraded Pakistan’s outlook from stable to negative in view of the significant deterioration in the country's external liquidity position and financing conditions since early 2022.
Fitch saw considerable risks to implementing the International Monetary Fund (IMF) programme and to continued access of Pakistan to financing after the programme's expiry in June 2023 in a tough economic and political climate.
The announcement comes after Moody's Investors Service downgraded the country’s outlook to negative from stable...
citing Pakistan's heightened external vulnerability risk and uncertainty around the sovereign's ability to secure additional external financing to meet its needs.
However, Moody's announcement came when talks with the IMF were still ongoing. Last week, the IMF did reach a staff-level agreement with Pakistan authorities.
“Despite reaching a staff-level agreement with the IMF last week, investor confidence has not returned,” said Fahad Rauf, Head of Research at Ismail Iqbal Securities Limited.
“The downgrade by ratings agencies suggests investors are seeing political volatility ahead, especially when it comes to the government taking fiscal consolidation measures,” said Rauf.
“Unpopular decisions are needed for the economy and resumption of the IMF programme. In the current political climate, these measures have taken a back seat,” said Rauf.
Moreover, the pressure in the currency market was also being reflected at the PSX, said Rauf. Pakistan's rupee hit the 221 level after a massive deprecation of Rs5.8 on Tuesday.