PSX struggles amid earnings season, policy concerns

The capital market continued its downward slide on Tuesday, with investors treading cautiously as corporate earnings season commenced.

Disappointment over recent payouts in the oil sector, coupled with broader market uncertainty, weighed on investor sentiment.

"Earnings season has started, and stocks are reactive to earnings and payouts. Disappointment on payouts kept the oil sector under pressure yesterday and caused pressure in the broader market," Ismail Iqbal Securities CEO Ahfaz Mustafa said.

"This pressure has carried on today as people have become cautious before earnings announcements," he added.

The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index closed at 112,030.36, registering a sharp drop of 1,489.96 points or -1.31% from the previous session's close of 113,520.32. During the session, the index climbed to an intraday high of 113,644.71 but also touched a low of 111,434.95.

On Monday, the State Bank of Pakistan (SBP) announced a 100-basis-point cut in its policy rate, reducing it to 12%. This marked the sixth consecutive rate cut since June.

SBP Governor Jameel Ahmed noted that inflation is expected to ease further in January, though core inflation remains elevated. The central bank projected full-year inflation to average between 5.5% and 7.5%.

On Monday, Mari Energies Limited (Mari) reported a 19% year-on-year decline in profitability for H1FY25, posting Rs30,396 million (EPS: Rs25.32) compared to Rs37,505 million (EPS: Rs31.24) in H1FY24. The company’s quarterly profit also declined by 39% YoY to Rs11,168 million (EPS: Rs9.30), driven by a 115% YoY increase in operating and administration costs and a 15% incremental royalty on the Mari D&P Lease wellhead value.

The government has reallocated Rs82 billion from the profits of state-owned Sui gas companies, originally intended for reducing circular debt, to prevent a gas tariff hike for ordinary consumers.

“We had allocated Rs100 billion of the companies’ profits for curtailing circular debt,” said Petroleum Minister Musadik Malik. “Now, Rs82 billion will be used to ensure ordinary consumers aren’t burdened with higher utility costs.”

The Finance Division's Half Yearly Report (July-December 2025) highlighted that Pakistan's GDP expanded by 2.5% in H1FY25, building on stabilisation achieved last year.

Inflation declined to 7.2% in the first half of FY25, compared to 28.8% a year earlier, supported by easing global prices, a stable exchange rate, and targeted government policies.

The report attributed the economic recovery to sound macroeconomic management, fiscal consolidation, and effective inflation control measures.

Stocks began the week on a negative note as the KSE-100 Index plunged 1,360.16 points, or 1.18%, to close at 113,520.32. The index hit a high of 115,596.87 points during the session, while the lowest level was recorded at 113,482.23 points.

As the earnings season progresses, the market is likely to remain reactive to corporate results.