Karachi, Aug. 1 : With Washington ramping up pressure on Islamabad to rein in the Inter-Services Intelligence (ISI) and other Pakistani intelligence outfits, the impact is being felt in the country’s share/ stock markets.

On Thursday, the benchmark KSE-100 Index of the Karachi Stock Exchange dropped by around 2.5 per cent or 269 points to close at 10,583, as nervous foreign investors sold portfolios worth more than 8.7 million dollars domestic institutions also adopted a cautious approach.

Traders are of the view that the performance of the stocks are on a downward slide because of a “series of bad news about US-Pakistan relations in terms of the war against terrorism and Pakistan''s role in controlling militancy."

A report in Wednesday''s edition of The New York Times cited new CIA assessments indicating clear links between officials of Pakistan''s Inter-Services Intelligence (ISI) and the Afghan militants tied to al-Qaeda.

Though the Pakistan Army strongly denied the charges, another report in The News, quoted the country''s defence minister, Ahmad Mukhtar, as saying that U. S. President George W Bush had expressed annoyance at the ISI when he met Pakistani Prime Minister Yousaf Raza Gilani in Washington.

"President Bush expressed concern that certain elements in the ISI were leaking information to the terrorists before they could be hit by the U. S. or Pakistani forces. This is a cause of concern for the U. S. side," Mukhtar was quoted as saying.

Traders said such reports only built up the already tense atmosphere on the investment horizon in the country.

Afghanistan''s President Hamid Karzai, who is due to visit New Delhi next week, last month also lashed out at the ISI for supporting incursions into his country.

Karzai also warned against possible attacks inside Pakistan to hit militant strongholds in the restive north-western tribal region.

Pakistani stocks were also down because of changes in profit margins of oil companies as the government capped their profits at around 100 dollars a barrel with anything above threshold to go to the government, traders said. (ANI)