Brokerage firm projects KSE-100 to touch 127k by 2025

Brokerage firm Topline Securities has projected a 37 per cent return for the Pakistan Stock Market (PSX) by December 2025, with the KSE-100 Index expected to reach 127,000 points. This optimistic forecast is driven by a combination of economic stability, fiscal consolidation and improving macroeconomic indicators.

In its report ‘Pakistan Strategy -- Pakistan Outlook 2025’ published on Saturday, the firm highlights a potential re-rating of the market’s price-to-earnings (P/E) ratio, driven by declining bond yields and increasing liquidity in equities. As the market benefits from these factors, Topline Securities expects the KSE-100’s forward P/E ratio to rise from its current level of 4.6x to 5.75x by December 2025.

Key drivers for the market’s growth in 2025 include the successful completion of Pakistan’s IMF reviews, the passage of the FY26 budget in line with IMF guidelines, and the possibility of a credit rating upgrade. The report also highlights potential opportunities from privatisation efforts, including the sale of loss-making state-owned enterprises (SOEs) such as PIA and Discos, as well as the potential materialisation of the Reko Diq deal.

The firm notes that recent shifts in investment preferences, particularly the movement of funds from fixed-income instruments into equities, will continue to fuel the market’s growth. Mutual funds have already been net buyers, investing $138 million in the equity market over the past two months. With declining yields on one-year Sukuk and T-bills, which are now yielding less than half of what they offered a year ago, investors are increasingly turning to stocks for better returns.

On the economic front, Topline Securities expects external indicators to gradually improve, citing contained import growth and strong foreign remittance inflows. These improvements are expected to help Pakistan’s foreign exchange reserves cross the $13 billion mark by June 2025, covering nearly three times the country’s monthly import needs.

Inflation is also projected to significantly decrease, averaging 7-8 per cent in FY25, down from 23.4 per cent in FY24. With inflationary pressures easing, the report predicts that the central bank’s policy rate will drop to 11-12 per cent by December 2025 from the current level of 15 per cent.

While the economic recovery is expected to boost market performance, the brokerage firm forecasts a modest GDP growth of 2.5-3 per cent in FY25, primarily driven by a weak agriculture sector, which is expected to see a 1.0 per cent growth due to challenges in major crops. The services sector is projected to grow at 4.1 per cent, while the industrial sector may see a 2.3 per cent growth.

Topline Securities also predicts that sectors such as consumer goods, pharmaceuticals, and energy (particularly exploration and production companies like OGDC and PPL) will benefit from lower interest rates and a stable currency. The report highlights key stocks to watch, including OGDC, PPL, MEBL, FFC, LUCK, HBL, SYS, PSO, SAZEW, AIRLINK and NML, along with top picks from Alpha stocks like COLG, PKGS, SEARL, AGP, MUREB and AICL.

Overall, the firm’s outlook for Pakistan’s stock market in 2025 remains optimistic, with expectations of economic stabilisation, continued investment flows into equities, and structural reforms in key sectors supporting market growth.