KARACHI: A flurry of bad news triggered bloodbath at the stock market which saw the KSE-100 index suffer its biggest single day drop of 860.77 points (2.10 per cent) since the new government took over. The index wrapped up at 39,222 points, knocking down the 40,000 barrier.

In the first session, the stocks began to melt as panic gripped the market after observations by the International Monetary Fund that painful measures were required to stabilise the economy and control deficits.

The fund asked for more exchange rate flexibility and monetary policy tightening. The State Bank of Pakistan`s weekly data unveiled weekly foreign exchange reserves at $8.4billion, which stood at almost a four-year low.

Moreover, the Oil and GasRegulatory Authority notified new sale prices of natural gas with effect from Sept27, which put most sectors under the hammer.

The first session saw theindex close down by 746 points but downward spiral escalated in the second halfwith market hitting intraday low by 1,057 points, as worried investors started to jettison shares on the news of arrest of Shahbaz Sharif in connection with an alleged case ofcorruption.Investors feared that the arrest was likely to heat up political environment in the country.

The volume increased 39pc to 153.5 million shares while traded value also rose by 29pc to Rs.5.41 billion.

According to Arif Habib Ltd, sectors contributing to the day`s dismal performance included banl(s, lower by 161 points, exploration and production 119 points, cement 87 points, oil and gas marketing companies 54 points, autos 53 points.

Major laggards were United Bank, down 3.63pc, Pakistan Petroleum 2.04pc, Habib Bank 1.95pc, Oil and Gas Development Company 2.07pc and MCB 2.23pc, taking away 226 points.