PSX soars to all-time high after budget keeps Capital Gains Tax intact

A favourable tax tilt toward stocks helped fuel a major rally on the bourse Wednesday, after the new budget held capital gains tax steady and hiked rates on interest income.

“Lower taxes on equity versus fixed income is a major trigger for PSX. This is just the beginning towards 150,000 in a year,” said independent investment and economic analyst AAH Soomro.

The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index settled at at an all-time high of 124,352.68, up 2,328.24 points, or 1.91%, from the previous close of 122,024.44.

During the session, the index climbed to an intraday high of 124,588.17, gaining 2,563.73 points, or 2.1%, and touched a low of 123,237.99, reflecting a rise of 1,213.55 points, or 0.9%.

Prime Minister Shehbaz Sharif expressed satisfaction with the stock market touching its highest level in history. He said the market rally reflects investors' confidence in a people-friendly budget.

Brokers and analysts welcomed the FY2025–26 budget, which kept the capital gains tax (CGT) on equities unchanged at 15%, while increasing taxes on interest income — a move seen as tilting investor preference towards stocks.

The budget projects Rs19.3 trillion in revenues and Rs25.8 trillion in expenditures, resulting in a federal fiscal deficit of Rs6.5 trillion, or 5.0% of GDP. The overall national deficit is estimated at Rs5 trillion (3.9% of GDP), requiring provincial governments to generate a Rs1.5 trillion surplus — up from Rs1 trillion in FY25.

Topline Securities noted that if passed without significant changes, the budget could support a re-rating of the market’s price-to-earnings (PE) ratio from 5.2x to 7x, further enhancing the appeal of equities in the coming fiscal year.

The rally follows a modest advance on Tuesday, when the KSE-100 Index rose by 383.44 points, or 0.32%, to close at 122,024.44. The index hit a high of 122,611.53 and a low of 121,589.90 during that session.