KARACHI: The Pakistan Stock Exchange (PSX) posted a modest gain during the outgoing week, with the benchmark KSE-100 index rising by 0.4 per cent on a week-on-week (WoW) basis.
While investor sentiment was buoyed early in the week by a market-friendly budget and strong economic data, mounting geopolitical tensions by the week’s end weighed on gains and triggered a round of profit-taking.
The market is expected to remain range-bound in the near term, as geopolitical risks may temper bullish sentiment. Investors will also closely watch for any further developments regarding foreign inflows, external financing and potential revisions to the budget proposals as the debate in parliament unfolds.
The market opened on a positive note as the federal budget for FY26 sparked optimism among investors. The government’s decision to keep capital gains tax (CGT) and dividend tax rates unchanged, along with its broader fiscal consolidation approach, was perceived favourably by market participants. “The PSX welcomed Budget FY26 as the government did not announce any adverse measures for the capital markets, where CGT provisions were better than expected, encouraging mutual funds to divert funds towards equities,” said Syed Danyal Hussain, analyst at JS Global.
The KSE-100 index climbed as much as 2.2 per cent in the first two sessions of the week, reaching an all-time high of 124,353 points. However, sentiment turned cautious on Friday following global developments. The US imposed a 50 per cent tariff on steel imports from key trading partners, while tensions escalated in the Middle East following an Israeli strike in Iran that killed senior military personnel. These developments triggered a correction at the close of the week.
On a weekly basis, the KSE-100 gained 502 points, equivalent to a 0.4 per cent rise. Average daily traded volume surged to 907 million shares, up 37 per cent week-on-week, while average daily traded value rose by 33 per cent to Rs37 billion. “The budget’s overall tone of fiscal prudence combined with incentives for the salaried class and construction sector created a constructive environment for equities,” noted analyst Nabeel Haroon at Topline Securities.
The finance minister unveiled a Rs17.3 trillion budget for FY26. The government aims to reduce the fiscal deficit to 3.9 per cent of GDP and achieve a primary surplus of 2.4 per cent. Tax revenues are projected at Rs14.1 trillion, up 19 per cent year-on-year, while the public sector development programme (PSDP) has been allocated Rs1 trillion, representing a 29 per cent increase. Relief measures for the salaried class included tax cuts in the first three income slabs, while additional initiatives were announced to boost construction activity.
Macroeconomic indicators also added support to market performance. Remittances in May stood at $3.7 billion, marking a 16 per cent month-on-month (MoM) and 14 per cent year-on-year increase, making it the second-highest monthly inflow on record. For the eleven months of FY25, cumulative remittances reached approximately $35 billion, up 29 per cent from the same period last year. The government signalled plans to secure $2 billion in financing from commercial banks to help raise the State Bank of Pakistan’s (SBP) foreign exchange reserves to $14 billion by the end of June.
Further bolstering sentiment was data showing large-scale manufacturing (LSM) grew by 1.8 per cent year-on-year (YoY) in March 2025, indicating signs of a gradual recovery in industrial activity. Meanwhile, car sales rose sharply in May, posting a 31 per cent year-on-year increase, another signal of improving consumer confidence.
In the government’s T-bill auction during the week, Rs853 billion was raised against a target of Rs900 billion. Yields declined between 1 and 25 basis points, suggesting lower inflation expectations and potential room for monetary easing in the months ahead.
Analysts anticipate selective interest in stocks linked to construction, banking and consumer sectors as clarity emerges on budget execution and international developments.