Stocks set to extend bullish run amid earnings season

KARACHI: Expectations of robust corporate earnings and encouraging developments on the circular debt front will likely help the Pakistan Stock Exchange (PSX) sustain its upward trend in the upcoming week.

With support from strong earnings from fertilizer companies, a consistent return on equity in banks, and improving cash flows from exploration and production (E&P) firms and oil marketing companies (OMCs), as well as declining interest rates and general economic stability, AKD Securities Ltd expects the KSE-100 index to continue its bullish trajectory towards a target of 165,215 points by December 2025.

During the outgoing week, the market staged a remarkable rally, closing at 145,383 points, up 4,348 points or 3.08 per cent week-on-week (WoW), marking a record-high closing on Thursday at 145,647 points before a minor pullback in the final session.

Average daily traded volume surged by 16.3 per cent WoW to 653 million shares, compared to 561 million shares in the previous week, reflecting renewed investor participation.

Nabeel Haroon, analyst at Topline Securities, attributed the gains primarily to aggressive mutual fund buying fuelled by fund inflows, as equities continued to outperform other asset classes.

Macroeconomic indicators provided a mixed picture. The trade deficit for July 2025 widened sharply by 44 per cent year-on-year (YoY) to $2.8 billion due to higher imports, while remittances rose 7 per cent YoY to $3.2 billion, though declining 6.0 per cent month-on-month (MoM).

The State Bank of Pakistan’s (SBP) foreign exchange reserves slipped by $72 million WoW to $14.2 billion, largely on account of external debt repayments. The rupee appreciated modestly by 0.1 per cent WoW, closing at Rs282.47 against the US dollar.

Sectoral activity was vibrant, with Woollen, Jute, Insurance, Tobacco, and Food & Personal Care emerging as the top performers, posting WoW gains of 13.3, 7.2, 5.2, 5.0 and 4.4 per cent, respectively. Conversely, synthetic & rayon, close-end mutual funds, chemical, sugar & allied industries, and textile weaving sectors recorded declines of 3.2, 1.9, 1.6, 0.7, and 0.6 per cent respectively. Among individual stocks, AGL (+31.5 per cent WoW), Nestle (+16.8 per cent WoW), UNITY (+16.4 per cent WoW), HBL (+14.9 per cent WoW), and BNWM (+13.3 per cent WoW) led the gainers, while GADT (-9.6 per cent WoW), PKGP (-6.1 per cent WoW), FABL (-5.0 per cent WoW), LCI (-4.2 per cent WoW), and IBFL (-3.7 per cent WoW) lagged behind. Flow-wise, banks/DFIs recorded net selling worth $18.8 million, absorbed mainly by mutual funds with net buying of $22.9 million.

Syed Danyal Hussain, analyst at JS Research, noted that sentiment received a boost as the US imposed an additional 25 per cent tariff on Indian goods, raising reciprocal tariffs to 50 per cent – seen as a potential advantage for Pakistan’s export-oriented sectors.

On the policy front, the government made significant headway in power sector reforms, slashing circular debt by Rs780 billion to Rs1.6 trillion and unveiling a five-year privatisation roadmap involving 24 companies, with 10 – including Pakistan International Airlines – set for sale in the first phase.

Textile exports jumped 33.7 per cent YoY in July 2025 to $1.69 billion, up from $1.27 billion in the same month last year. In the T-bill auction, the SBP raised Rs386 billion against a Rs400 billion target, with yields rising by 5-30 basis points (bps) across maturities.

Looking ahead, analysts expect the bullish momentum to extend into next week, with earnings season in full swing and clarity over corporate results likely to guide stock-specific performance. Progress on the circular debt settlement, foreign investment prospects in the oil and gas sector, and macro stability will remain key triggers, while global commodity and currency movements will also influence market sentiment. The PSX, having broken multiple records in recent sessions, appears well-placed to test fresh highs if domestic and global cues remain favourable.