The capital market experienced continued bearish trend on Thursday, weighed down by concerns over political instability, policy uncertainty, and structural challenges.  The market saw modest gains early in the session, but the lack of sustained buying pressure, coupled with bearish drivers, kept investors cautious. The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index ended the session at 112,638.26, recording a loss of 1,510.19 points, or -1.32%, from the previous close of 114,148.45. The market touched an intraday high of 114,329.95 points but retreated sharply to a low of 112,594.66 points. "Pressure was witnessed at the PSX amid concerns over a bar on non-filing investors under new tax amendments," said Ahsan Mehanti, Managing Director and CEO of Arif Habib Commodities. He added, "Political uncertainty, concerns over cautious SBP policy easing, and uncertainty over the outcome of slippages on IMF tax collection and structural reform targets played a catalyst role in bearish activity." The recently introduced Tax Law (Amendment) Act, 2024, which bars non-filers from opening accounts in the stock market, has drawn sharp criticism from stakeholders. The Pakistan Stock Brokers Association (PSBA) has raised serious concerns, calling for urgent dialogue with government officials. The contentious amendment stipulates: “any person authorised to sell securities, including debt securities or units of mutual funds, shall not sell, open an account or clear the sale of securities or mutual funds to an ineligible individual or association of persons.” This rule directly impacts non-filers, many of whom represent a significant portion of active traders within the stock market. The PSBA warned that the move could significantly reduce participation in the stock market and dampen investor sentiment. Adding to fiscal challenges, last month, Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial disclosed that the country’s tax gap stood at Rs7.1 trillion, with the income tax gap alone accounting for Rs2.4 trillion. The revelation underscores Pakistan’s difficulty in meeting tax collection targets tied to the IMF programme. The market’s volatility was exacerbated by profit-taking from major institutional investors such as insurance companies and banks, which was not met with adequate fresh buying by mutual funds. "In recent sessions, we have seen profit-taking by major institutional investors, such as insurance companies and banks, without adequate fresh buying by mutual funds," said Muhammad Saad Ali, Director of Research at Intermarket Securities Ltd. "The market lacks new positive triggers at the moment, after a strong run-up, and there are growing concerns around politics. I suspect the same theme is playing out today." Prime Minister Shehbaz Sharif, during his visit to Karachi on Wednesday, sought to restore optimism, reiterating his belief in the economy's path to recovery. Speaking at the Pakistan Stock Exchange, the premier acknowledged that current taxation rates were hindering business and investment activities. However, he emphasised the importance of honouring commitments made under the IMF programme, recognising its role in ensuring economic stability. Adding to this narrative, Deputy Prime Minister Ishaq Dar highlighted the long-term benefits of stock market integration, asserting that it had evolved into a robust foundation for the economy. Finance Minister Muhammad Aurangzeb also underscored the critical role of the stock market in boosting investor confidence and driving economic growth. Exacerbating the economic strain, the diversion of re-gasified liquefied natural gas (RLNG) to the domestic sector surged to 450mmcfd in January 2025, up from 250mmcfd in December 2024. This increase, under Sui Northern Gas Pipelines Limited’s jurisdiction, is expected to worsen the circular debt in the gas sector. The differential between the domestic tariff of Rs1,250 per MMBTU and the RLNG tariff of Rs3,600 per MMBTU is adding substantial financial strain to gas utilities, raising concerns about the sector's sustainability. The IMF’s proposed levy on gas supplies to industrial captive power plants (CPPs) remains a critical structural benchmark under the Extended Fund Facility (EFF), further adding to investor anxieties over compliance and financial strain. On the fiscal front, the government raised Rs434 billion through the auction of Market Treasury Bills on Wednesday, surpassing the target of Rs250 billion but falling short of the Rs654 billion maturity amount. Declining cut-off yields for three-month, six-month, and 12-month papers—by 22bps, 21bps, and 50bps, respectively—indicate market anticipation of further monetary easing by the State Bank of Pakistan (SBP). Expectations of a rate cut have been bolstered by declining inflation, which eased to 4.1% year-on-year in December from 4.9% in November. This trend, driven by a stable currency, lower global commodity prices, and improved supply chain conditions, has provided some optimism for policymakers and investors alike. The KSE-100 Index closed at 116,052.68 on Wednesday, marking a loss of 202.44 points, or -0.17%, as profit-taking and ongoing concerns about the energy sector’s circular debt kept the market in the red for the third consecutive day.