Pakistani stocks fall sharply on security, politics

KARACHI, Nov 2 (Reuters) - Pakistani stocks fell sharply on Monday after a bomb blast in Rawalpindi killed 35 people and as fears of a political crisis loomed amid a government move to get a controversial law approved by the parliament.

The Karachi Stock Exchange's benchmark 100-share index ended 3.13 percent, or 286.78 points lower, at 8,872.40 on turnover of 106.23 million shares.

"The market started on the lower side today but the slide accelerated following the bombing in Rawalpindi," said Khalid Iqbal Siddiqui, director at brokers Invest and Finance Securities.

Taliban militants are being squeezed out of their remote strongholds on the Afghan border by a massive army offensive and have retaliated by stepping up bomb attacks and commando-style raids on urban targets.

Dealers said that the market saw a free fall towards the close after the Muttahida Qaumi Movement (MQM), a coalition partner in the federal as well as the provincial Sindh government, said it would oppose the controversial National Reconciliation Order in the parliament.

Local television channels reported that the MQM had also asked President Asif Ali Zardari to resign.

Dealers said the market fundamentals were still strong, but investors were on the sidelines due the country's worsening security as well as political situation.

The KSE-100 index is still up 51.28 percent this year after losing 58.33 percent last year.

In the currency market, the rupee ended flat at 83.65/70 to the dollar, little change from its previous closing.

Dealers expect pressure from importers will further weaken the currency and rising violence could also have a negative affect.

The rupee has weakened 5.42 percent this year after losing 22.12 percent last year. (Reporting by Faisal Aziz; Editing by David Fox) (For more Reuters coverage of Afghanistan and Pakistan, see: here)