PSX slips after early high amid budget uncertainty

The capital market reversed early gains to close lower on Thursday, as rising uncertainty over the upcoming federal budget and IMF-driven tax reforms prompted investors to lock in profits and adopt a cautious stance.

“Budget jitters are causing people to remain on the sidelines and book profits,” said Ahfaz Mustafa, CEO of Ismail Iqbal Securities, pointing to mounting investor nervousness as budget negotiations continue.

The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index settled at 119,153.04 points, down 778.41 points, or -0.65%, from the previous close of 119,931.45.

The index had surged to a new intraday high of 120,699.17, gaining 767.72 points, or 0.64%, before falling to a low of 119,062.03, down 869.42 points, or -0.72%.

“It’s a continuation of the rally post relief from the Indo-Pak war,” said AAH Soomro, an independent investment and economic analyst. “The market overall remains attractive with more investors deploying funds consistently."

"Agreement with IMF on the budget is likely to give impetus to growth sector stocks and continue bull run eventually towards 150,000 in a year,” he added.

Investor confidence was buoyed this week after Pakistan's nominal GDP crossed the $400 billion 

Investor confidence was further buoyed this week after Pakistan's nominal GDP crossed the $400 billion mark for the first time, according to provisional estimates approved by the National Accounts Committee (NAC).

The economy’s size has expanded to Rs114.7 trillion ($411 billion) in FY25, up from Rs105.1 trillion ($372 billion) in the previous fiscal year. The NAC also reported GDP growth of 2.68% for the current year, with quarterly revisions showing growth of 1.37% in Q1 and 1.53% in Q2, though still below the government’s initial 3.6% target.

Meanwhile, budget negotiations between the government and the International Monetary Fund (IMF) remain underway. The IMF is pushing for higher taxation on agriculture-related inputs, including an increase in Federal Excise Duty (FED) on fertilisers from 5% to 10% and the introduction of a 5% tax on pesticides.

Prime Minister Shehbaz Sharif is reportedly urging the Fund to reconsider these proposals, citing the strain such measures could place on the farming sector.

The IMF is also advocating for the implementation of Agriculture Income Tax (AIT) starting July 1, 2025, and pushing for broader tax base reforms, including uniform turnover thresholds for income and GST registration.

Preliminary projections suggest AIT could raise Rs40–50 billion in the short term from provincial collections.

The rally follows Wednesday’s strong performance, when the KSE-100 Index closed at 119,931.45, gaining 960.33 points, or 0.81%.