KARACHI: After a brief dip at the end of CY25, the bulls on Thursday cheered the new year with a spectacular rally as a deceleration in Consumer Price Index-based inflation for December triggered renewed buying across the board.

Some positive developments, mainly the continuous easing of inflationary pressures, boosted investors’ hopes for a fresh cut in the State Bank of Pakistan’s policy rate, which surprised the market with a 50bps cut in its last review after keeping it steady since May 2025.

On Wednesday, Prime Minister Shehbaz Sharif launched the government’s Economic Governance Reforms, claiming that Pakistan had moved beyond “economic firefighting” after two years of difficult decisions. He maintained that these efforts had restored macroeconomic stability.

Amid falling profit rates, investors have turned to equities, moving funds from banks for higher and quicker returns.

This shift has contributed to the PSX’s bullish performance during the outgoing calendar year, pushing the index to a new high above 176,000 points. In 2025, the KSE-100 index achieved a remarkable 51pc year-on-year return, making it the second-best frontier market in dollar terms.

The first-quarter GDP growth of 3.71pc, compared to 1.56pc last year, further boosted investor sentiment. Despite the slowdown from 6.1pc growth in the preceding quarter, the economy showed resilience despite fiscal tightening and flood shocks.

At the start of the new calendar year, the PSX witnessed renewed buying interest, pushing the index to an all-time high of 176,355.49, after adding 2,301.17 points, or 1.32pc. Topline Securities attributed this positivity to local institutional buying.

The top positive contributors to the index were United Bank, Oil and Gas Development Company, Engro Holdings, Habib Bank, Lucky Cement, and Bank Al-Habib, which together contributed 1,207 points.

Ali Najib, Deputy Head of Trading at Arif Habib Ltd, said the new year kicked off on a strong note, reflecting continued investor economic optimism.

He observed that the rally was primarily driven by buying from local institutions at the start of the calendar year, as fresh allocations to PSX, a preferred asset class since mid-2023, were made just after Pakistan entered the IMF programme.

Market participation surged, with trading volume increasing by 46.53pc to 1.4 billion shares, while the traded value rose by 9.48pc to Rs48.4bn.

Analysts believe the PSX’s successful push beyond the psychological barriers of 175,000 and 176,000 points signals growing investor confidence in the market’s outlook for the year ahead. Should a correction occur, 175,000 points is expected to serve as immediate support for the index.

Published in Dawn, January 2nd, 2026