KSE-100 loses momentum but outlook remains positive

KARACHI: The coming week at the Pakistan Stock Exchange (PSX) is expected to see renewed momentum, with analysts projecting continued positivity following the International Monetary Fund’s (IMF) successful staff-level agreement on the second review, improved sovereign credit ratings and a decline in fixed-income yields.

According to AKD Research, investor sentiment is likely to strengthen further on expectations of foreign portfolio and direct investment inflows, supported by improved ties with the US and Saudi Arabia. With limited alternative investment avenues and attractive valuations, the KSE-100 currently trades at a price-to-earnings ratio of 7.4 times and offers a dividend yield of 6.6 per cent, analysts see potential for an upward trend in the near term.

During the outgoing week, however, the market remained volatile and ended slightly lower, pressured by weaker-than-expected corporate earnings and muted participation. The benchmark KSE-100 index declined by 502 points, or 0.3 per cent week-on-week (WoW), to close at 163,304 points. Trading activity also slowed, with average daily volumes dropping 17 per cent to 1.8 billion shares compared to 2.2 billion shares in the preceding week.

According to Wadee Zaman, analyst at JS Research, the market began the week on a strong footing, touching an intraday high of 168,414 points on news of a ceasefire between Pakistan and Afghanistan, but the rally fizzled out later amid profit-taking and cautious sentiment over earnings.

On the macroeconomic side, Pakistan posted a current account surplus of $110 million for September 2025, bringing the first-quarter FY26 deficit down to $594 million. IT exports rose to a record $366 million for the month, up 25 per cent year-on-year (YoY), while total first-quarter exports reached approximately $1.1 billion, marking a 21 per cent annual rise.

Power generation for September stood at 12,592 GWh, up 1.0 per cent YoY, with generation costs falling 24 per cent. The State Bank of Pakistan’s (SBP) foreign exchange reserves increased marginally by $14 million to $14.55 billion, while the rupee appreciated 0.03 per cent to close at Rs281 per US dollar.

Nabeel Haroon, an analyst at Topline Securities, noted that the index’s flat performance reflected temporary selling by mutual funds on rumours of redemptions and general profit-taking as major listed companies completed their September-quarter results. Average daily traded value during the week clocked in at Rs49.6 billion, slightly below recent highs.

Sector-wise, the best performers were jute (up 5.3 per cent), leather and tanneries (5.2 per cent), tobacco (4.5 per cent) and modarabas (4.0 per cent). In contrast, power generation and distribution (-10.3 per cent), refinery (-7.1 per cent), woollen (-4.3 per cent), transport (-4.2 per cent), and close-end mutual funds (-3.2 per cent) lagged behind.

Flow-wise, foreign investors and mutual funds emerged as net sellers, offloading $7.09 million and $3.69 million respectively, while individual investors absorbed most of the selling with net buying worth US$12.03 million.

Despite last week’s volatility, AKD Research maintains a bullish stance for the upcoming sessions, supported by policy stability, improving global perceptions, and rising foreign interest. Analysts expect renewed activity as clarity emerges on upcoming economic reforms and potential inflows linked to bilateral engagements with key allies.