KARACHI: The benchmark KSE-100 index rose 3.6 per cent week-over-week (WoW) as the Pakistan Stock Exchange (PSX) ended the week on a high note, helped by decreasing geopolitical tensions in the Middle East and a boost in investor confidence ahead of the fiscal year-end.
Analysts remain upbeat about the upcoming weeks, citing improving macroeconomic data that could spur additional increases, a mild inflation projection for FY26, and anticipated monetary easing.
According to AKD Securities, the index is poised to continue its upward trajectory with a target of 165,215 points by December 2025, supported by robust corporate earnings, falling interest rates and improved cash flows in key sectors such as banking, fertilisers, exploration and production (E&P), and oil marketing companies (OMCs).
During the week, the KSE-100 index gained 3.63 per cent, closing higher on the back of increased buying interest, particularly after the announcement of a ceasefire between Israel and Iran, which helped calm global oil markets and reduce investor anxiety.
Nabeel Haroon, an analyst at Topline Securities, attributed the rally to investor optimism following the geopolitical breakthrough, noting that the market benefitted from fiscal year-end positioning as well.
The average daily trading volume stood at 736 million shares, while traded value clocked in at Rs31.3 billion, reflecting a 10 per cent decline in turnover compared to the previous week, according to Wadee Zaman, analyst at JS Research. Despite the dip in activity, sentiment remained broadly bullish amid key economic developments.
The National Assembly passed the Finance Bill for FY26 during the week, approving a total outlay of Rs17.6 trillion. In a significant move aligned with International Monetary Fund (IMF) reforms, the government secured a $4.5 billion syndicated loan from commercial banks to reduce power sector circular debt, priced at Kibor minus 0.9 per cent.
External financing also saw notable developments. Pakistan received nearly $20 billion in foreign assistance during the first eleven months of FY25, including $6.9 billion in fresh loans and the remainder through rollovers from bilateral partners such as China, Saudi Arabia, and the UAE. Additionally, the government is seeking a rescheduling of $1.8 billion in debt from China for two years and is in talks for an additional $3.3 billion in financing. A separate $350 million agreement was also signed with the Asian Development Bank (ADB).
The T-bill auction saw strong investor participation with bids amounting to Rs2,299 billion. However, the government raised Rs345 billion against a target of Rs650 billion. Yields declined slightly across all tenors, with a drop of 5 to 9 basis points (bps), indicating expectations of monetary easing ahead.
Power generation data for May 2025 showed a modest year-on-year (YoY) increase of 1.0 per cent, suggesting stable industrial activity. However, concerns emerged on the reserves front, as the State Bank of Pakistan’s foreign exchange reserves dropped sharply by $2.7 billion week-on-week to $9.1 billion -- their lowest level since July 2024 -- primarily due to external debt repayments. According to Nabeel Haroon, reserves are expected to recover in the coming week, supported by an anticipated $3 billion inflow.
Looking forward, market participants remain bullish. AKD Securities anticipates sustained gains in the equity market, driven by a projected 4.4 per cent year-on-year (YoY) inflation rate for FY26, which provides ample room for monetary easing. Their top stock picks include OGDC, PPL, PSO, FFC, ENGROH, MEBL, MCB, HBL, FCCL, INDU, and SYS -- all positioned to benefit from improved fundamentals and a stable macroeconomic environment.
With clarity on the fiscal roadmap, softening global oil prices and expected improvement in external account metrics, the PSX appears well-positioned for further upside in the weeks ahead.