Pakistani stocks fell in early trade on Monday as investors reacted bearishly to a decision by the central bank over the weekend to leave interest rates unchanged despite an alarming slowdown in the economy, dealers said.
The Karachi Stock Exchange (KSE) benchmark 100-share index .KSE was 0.70 percent, or 37.85 points, lower at 5,339.57 points on turnover of 14.3 million shares by 9:43 a.m.
"There were some hopes in the market that the central bank might cut the interest rates by 50 basis points," said Sajid Bhanji, a dealer at brokers' Arif Habib Ltd.
Dealers said investors were also booking profits as the KSE-index gained 9 percent last week.
Pakistan's central bank said on Saturday its key policy discount rate would be left unchanged at 15.0 percent, although economic growth was set to fall to 3.7 percent in the fiscal year, the slowest since 2000/01.
The central bank raised interest rates by 2 percentage points in November, the same month it signed a $7.6 billion loan with the International Monetary Fund to stave off a balance of payments crisis.
State Bank of Pakistan Governor Salim Raza said there would be another review in April, leaving open the possibility of a change in rates later.
Analysts had expected the central bank to keep interest rates on hold but say the need for rate cuts is becoming more urgent as the economy weakens.
The government's top economic official said last authorities might start cutting interest rates this year as inflation eases.
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