KARACHI: The Pakistan Stock Exchange (PSX) endured a fourth difficult week as geopolitical strains between the United States and Iran, compounded by domestic political noise, triggered a significant sell-off, pushing the KSE-100 index below the 174,000-point level.
The index closed at 173,170 points, down 6,434 points, or 3.6 per cent week-on-week, marking a sharp correction from its January peak of 189,167. This represents a decline of 8.5 per cent from that high.
According to Topline Securities, foreign corporates were the primary sellers, offloading equities worth $26-28 million during the week. This foreign outflow overshadowed the buying by individuals and banks, which made net purchases of $14.4m and $12.1m, respectively.
Trading activity also slowed as Ramadan approached, with average daily volumes falling 22-24 per cent week-on-week to 654-831 million shares. The average traded value dropped 12 per cent to $134m, according to AKD Securities.
Sector-wise, Arif Habib Ltd noted that banks led the decline, contributing 1,044 points to the fall, followed by fertilisers (931 points), cement (814 points), investment banks (599 points), and oil marketing companies (509 points). Key negative contributors included Fauji Fertiliser Company, Engro Holdings, Pakistan State Oil, Lucky Cement, and Pioneer Cement.
Foreign selling and geopolitical strains weigh on sentiment
While the stock market faced a battering, several economic indicators offered a glimmer of support. The State Bank of Pakistan (SBP) reported that the country posted a current account surplus of $121m in January, reversing a deficit of $265m in December 2025 and $393m in January 2025. However, during the first seven months of FY26, the current account remained in deficit at $1.07bn, compared to a surplus of $564m in the same period last year.
According to the Pakistan Bureau of Statistics (PBS), the trade deficit for January stood at $2.76bn. Exports rose by 3.5pc year-on-year to $3.1bn, driven by a 34.8pc month-on-month increase, while imports declined by 1pc annually and 4.4pc month-on-month to $5.8bn. The cumulative trade deficit widened by 28.4pc to $22.1bn in 7MFY26.
The SBP reported that foreign direct investment (FDI) recorded an inflow of $173m in January, reversing a $135m outflow in December. However, cumulative FDI in 7MFY26 fell 41pc year-on-year to $981m.
On the industrial front, the PBS stated that large-scale manufacturing (LSM) output edged up 0.4pc year-on-year in December 2025, with a 9.3pc month-on-month increase. For the first half of FY26, LSM expanded 4.8pc, led by growth in the automobile and textile
sectors.
Auto financing showed continued growth, rising 35.8pc year-on-year to Rs328bn in January, while it increased 2.8pc on month-on-month. However, fertiliser offtake dropped by 48pc year-on-year in January, driven by high channel inventories following advance procurement in the prior month, as noted by Arif Habib Ltd.
Power generation increased 12pc year-on-year to 9,140 gigawatt hours (GWh) in January, with cumulative output in 7MFY26 reaching 76,496 GWh, up 2pc from the same period last year, according to AHL.
The SBP’s liquid foreign exchange reserves rose by $19m to $16.2bn as of Feb 13. The rupee remained largely stable, appreciating by 0.02pc week-on-week to close at Rs279.56 to the dollar. The real effective exchange rate stood at 103.29 in December, a 0.42pc decline from the previous month but a 5.37pc increase in FY26 to date.
In the petroleum sector, PBS reported that high-speed diesel prices increased by Rs7.32 per litre to Rs275.70, while the petroleum levy remained unchanged at Rs76.21 per litre.
Roshan Digital Account (RDA) remittance inflows reached $11.92bn by the end of January, with $1.97bn repatriated and $7.66bn used locally, leaving a net repatriable liability of $2.3bn. Cumulative inflows crossed the $12bn mark in February, according to SBP.
Other notable developments included a Rs5 per kilowatt-hour reduction in industrial power tariffs, a 19pc year-on-year increase in IT exports in January, and a 1.3pc rise in textile exports during 7MFY26.
Analysts are cautious but hopeful about the market’s near-term direction. AKD Securities believes that geopolitical developments and the outcome of the upcoming IMF review mission, due to arrive next week, will be crucial in determining investor sentiment. Additionally, the corporate results season may offer some upside, especially if earnings surpass expectations.
Currently, the KSE-100 index is trading at an attractive price-to-earnings ratio of 8.7 times, offering a dividend yield of approximately 5.6pc.
Published in Dawn, February 22nd, 2026