KARACHI: The Pakistan Stock Exchange (PSX) recorded a historic rally during the week ending May 17, 2025, as the KSE-100 Index gained 12,474 points to settle at 119,649, reflecting an 11.64 per cent increase week-on-week.
This marked one of the biggest weekly advances in the index’s history, driven primarily by a US-brokered ceasefire agreement between Pakistan and India on May 10.
The easing of geopolitical tensions following a week of heightened volatility had an immediate stabilising effect on investor sentiment. The rally was further supported by the International Monetary Fund’s (IMF) approval of the first review of Pakistan’s loan programme and the disbursement of a $1 billion tranche.
Additionally, the IMF’s approval of a further $1.4bn under the Resilience and Sustainability Facility reinforced optimism in the market, leading to a record single-day gain of 10,123 points at the start of the trading week.
Analysts expect benchmark KSE-100 Index to reach 165,215 points by December
Macroeconomic indicators for April 2025 also painted a relatively stable picture. Workers’ remittances for the month stood at $3.2bn, contributing to a current account surplus of $12 million. This pushed the cumulative surplus for the first 10 months of the current fiscal year to $1.88bn, a stark improvement from the $1.33bn deficit recorded during the same period in the previous year.
Foreign direct investment also showed significant improvement, with inflows of $141m in April compared to just $26m in March.
At the same time, the State Bank of Pakistan’s foreign exchange reserves increased by $71m week-on-week, reaching $10.4bn as of April 9. The rupee remained stable throughout the week, closing at 281.66 against the US dollar.
Broad-based gains
Market activity improved markedly, with average daily traded volume increasing by 34.8pc to 685m shares from 508m in the previous week, according to AKD Research.
Topline Securities reported that the average daily traded value stood at Rs38.6bn, underscoring stronger investor participation.
Gains were broad-based, with most sectors closing the week in positive territory. The vanaspati and allied industries sector led the rally with a weekly gain of 34.2pc, followed by transport at 29.4pc, refineries at 27.5pc, the woollen sector at 20.7pc, and investment banks, investment companies, and securities companies at 19.8pc.
In contrast, some segments of the market underperformed, with textile spinning and jute declining by 9.5pc and 4.8pc respectively over the week.
Among individual stocks, the top performers included Agritech Limited, which rose by 33.7pc, FrieslandCampina Engro Pakistan Limited with a 32.5pc gain, and Pakistan Telecommunication Company Limited, which climbed 29.5pc.
Attock Refinery Limited and Searle Company Limited also posted robust gains of 27.1pc and 26.6pc, respectively.
On the other hand, the week’s laggards included Pakgen Power Limited, down 2.6pc, Ibrahim Fibres Limited, which fell 2.5pc, Nestlé Pakistan Limited, which declined by 0.4pc, and Pak-Gulf Leasing Company Limited, marginally lower by 0.2pc.
Institutional flows reflected strong interest from mutual funds, which absorbed most of the week’s selling with a net purchase of $39.2m. Meanwhile, banks and development financial institutions were net sellers, offloading $20.6m in equities.
Trading activity was also fuelled by declining yields in the government securities market. In the Treasury Bills auction held during the week, the government raised Rs664bn out of a total participation of Rs1.99 trillion. Yields dropped by 66 to 90 basis points across tenors, reflecting expectations of a lower interest rate environment ahead.
Additional news developments contributed to the overall positive environment. The government’s proposal of up to a 10pc tax cut for salaried individuals was well received by the market.
Meanwhile, Pakistan and Russia are exploring a collaboration to establish a new steel mill, and the prime minister has constituted a special committee to push forward reforms in the petroleum sector.
Fuel prices were slightly impacted by a Rs1.87 per litre increase in the inland freight equalisation margin on petrol and diesel. Reports also surfaced about the possibility of future talks between Pakistan and India in Saudi Arabia, raising hopes for sustained diplomatic engagement.
Outlook
Looking ahead, the market outlook remains optimistic. The ceasefire agreement and the IMF’s financial support are expected to act as strong catalysts in the coming weeks.
Analysts forecast that the KSE-100 Index could reach 165,215 points by December 2025, supported by robust corporate earnings, particularly in the fertiliser sector, consistent return on equity in banking stocks, and improved cash flows in the exploration and production and oil marketing sectors. Falling interest rates and greater macroeconomic stability are also expected to provide tailwinds.
According to AKD Research, top picks going forward include the Oil and Gas Development Company, Pakistan Petroleum, Pakistan State Oil, Fauji Fertiliser, Engro Holdings Limited, Meezan Bank, MCB Bank, Habib Bank, Lucky Cement, Fauji Cement, Indus Motor Company and Systems Limited.
Barring any geopolitical surprises or domestic instability, the positive momentum in Pakistan’s equity market is likely to continue in the near term.
Published in Dawn, May 18th, 2025
