Geopolitical tensions to steer stock market direction

KARACHI: The geopolitical situation is expected to dictate market trends in the coming week, with investor sentiment closely tied to developments, particularly the evolving India-Pakistan situation, analysts said.

With the corporate earnings season underway, key announcements are also anticipated to drive stock-specific momentum, they believed.

The KSE-100 index exhibited mixed trends during the outgoing week, initially continuing its upward trajectory, supported by encouraging economic indicators. However, momentum weakened later in the week as geopolitical concerns, particularly regarding India and Pakistan, came to the forefront.

On the macroeconomic front, banking sector deposits recorded healthy growth of 11.7 percent year-on-year (YoY) in March 2025. However, the State Bank of Pakistan’s (SBP) foreign exchange reserves declined by $367 million on a weekly basis, closing at $10.2 billion. Amid geopolitical noise and cautious investor sentiment, the benchmark KSE-100 index closed the week at 115,469 points, reflecting a decline of 1,846 points or 1.6 per cent week-on-week (WoW).

In its weekly report, Arif Habib Limited noted that sector-wise negative contributions came from exploration and production (E&P) companies (594 points), commercial banks (295 points), technology (188 points), power (140 points), and pharmaceuticals (116 points). Meanwhile, sectors that contributed positively included fertiliser (162 points), food (74 points), and automobile assemblers (23 points). Scrip-wise, major negative contributors were UBL (507 points), MARI (369 points), EFERT (225 points), PSO (181 points), and PPL (151 points), whereas positive contributions came from FFC (403 points), MEBL (237 points), MCB (120 points), SNGP (78 points) and NATF (54 points).

Foreign buying was witnessed during the week, amounting to $2.09 million compared to a net sell of $4.01 million in the previous week. Major buying was observed in oil marketing companies (OMCs) ($2.7 million), followed by E&Ps ($1.1 million). On the local front, selling was reported by mutual funds ($18.9 million) and broker proprietary trading ($2.02 million). Average volumes stood at 599 million shares (down 32 per cent WoW), while the average value traded settled at $104 million (down 10 per cent WoW).

Economic developments during the week included a rise in profit repatriation to $1.72 billion during July–March FY25, a 23 per cent surge in IT exports during Q3FY25, and an increase in food exports to $5.75 billion over the July-March period. Pakistan also received $555 million in external financing during March, while Ghani Chemical Industries commenced operations with a capacity of 275 tonnes per day (TPD). Topline Securities, in its weekly commentary, noted that the KSE-100 index declined by 1.57 per cent WoW, attributing the fall to cross-border tensions with India and pressure from the futures rollover week.

Other significant developments included Pakistan reaching an understanding with two foreign commercial banks for a $1 billion loan at an interest rate of around 7.6 per cent. The government also decided to raise debt from the domestic capital market by issuing Pakistan’s first sustainable investment asset-backed Sukuk bonds to fund three clean energy projects, which require an additional Rs52 billion for completion. The SBP’s reserves declined further by $367 million to $10.205 billion for the week ended April 18, due to external debt repayments.

The average daily traded volume and value for the week stood at 599 million shares and Rs29.3 billion, respectively.