PSX slips as profit-taking erases gains from surprise rate cut

The capital market rallied at the open on Tuesday but soon faltered, as investors rushed to realise gains following the central bank’s unexpected rate cut.

The Pakistan Stock Exchange's benchmark KSE-100 Index closed at 113,568.50, down 533.73 points or -0.47%, from the previous close of 114,102.23.

 During intraday trade, the index climbed to an intraday high of 115,093.10, an increase of 990.87 points, or 0.87%. 

The session’s low was recorded at 113,418.52, reflecting a decline of 683.71 points, or 0.6%. 

“The market was unable to capitalise on yesterday's surprise rate cut due to profit taking. The banks are impacted negatively due to the tightening spread, hence, profit taking was witnessed,” said Ahfaz Mustafa, CEO of Ismail Iqbal Securities.

“With the IMF board approval, budget and the pending border crisis in play, the market player will remain cautious,” he added.

The bourse had opened on a strong note, buoyed by the State Bank of Pakistan (SBP) delivering a larger-than-expected interest rate cut yesterday before the shift in momentum.

“The market is buoyed by the SBP's 100bps policy rate cut announced yesterday, signalling a resumption of monetary easing that only a minority anticipated,” said Amreen Soorani, Head of Research at Al Meezan Investment.

“Coupled with improving macroeconomic fundamentals and the SBP's cautious forward monetary policy guidance alongside expected strong forex inflows in the next two months, investor confidence appears to be recovering after a turbulent April," she added.

The central bank’s surprise 100-basis-point interest rate cut, its largest since June 2024, lifted the KSE-100 index to an intraday high of 115,093.10, up 990.87 points or 0.87% from the previous close.

The move, which lowered the benchmark rate to 11%, a three-year low, defied market expectations and signalled a decisive turn toward economic stimulus amid easing inflation and persistent external risks.

Most analysts had predicted no change or a marginal cut, making the decision a bold statement by the SBP as it navigates cooling price pressures and geopolitical uncertainty.

The PSX closed largely unchanged on Monday, with the KSE-100 index edging down by 11.7 points to settle at 114,102.23. The session had seen highs of 114,552.21 and a low of 113,077.67 as investors awaited clarity from the central bank’s policy decision.