KARACHI: Despite heightened volatility driven by multiple economic headwinds from the ongoing Middle East conflict, the Pakistan Stock Exchange (PSX) managed to close April on a positive note.

The gains came even after an interest rate hike that rattled business confidence in the last week of the ongoing month, with industry leaders calling for urgent measures to reduce production costs amid unprecedented fuel prices.

According to Topline Securities Ltd, the benchmark KSE-100 index posted a strong month-on-month gain of 9.6 per cent, largely driven by improved investor sentiment after a temporary ceasefire between the United States and Iran. The development sparked a broad-based rally across equities.

However, the momentum faded towards the end of the month as uncertainty resurfaced. Delays in peace negotiations, particularly over US demands for Iran to curb its nuclear programme, weighed on sentiment and triggered selling pressure.

Index rose 9.6pc despite rate hikes, higher energy costs, and Middle East unrest

Key macroeconomic indicators presented a mixed picture. Inflation, measured by the Consumer Price Index (CPI), rose to 7.30pc in March 2026 from 6.98pc a month earlier. Workers’ remittances stood at $3.8 billion in March, declining 5pc year-on-year but increasing 17pc month-on-month. Meanwhile, the current account recorded a surplus of $1.07bn, significantly higher than February’s $231 million surplus.

During the month, the State Bank of Pakistan (SBP) raised the policy rate by 100 basis points to 11.5pc, a move that drew concern from the business community already grappling with elevated fuel and electricity costs.

Market participation data showed divergent trends. Banks, insurance companies and foreign corporates emerged as net sellers, offloading equities worth $44m, $33m and $15m, respectively. In contrast, individuals, mutual funds and local companies were net buyers, purchasing shares worth $59m, $22m and $15m.

Average daily trading activity remained robust, with volumes at 928 million shares and average traded value at Rs41 billion.

On a weekly basis, the KSE-100 index declined 4.5pc, or 7,678 points, to settle at 162,994, according to Arif Habib Ltd. The decline was attributed to renewed geopolitical tensions, rising global oil prices and the SBP’s policy tightening.

Pakistan’s return to the spot LNG market amid rising power demand also underscored energy concerns. Authorities secured a cargo at $18.4 per mmBtu to manage short-term electricity shortages during peak consumption.

Power sector challenges persisted, with circular debt rising to Rs1.84 trillion in February from Rs1.76tr in January. On a fiscal year-to-date basis, the increase stood at Rs225bn.

In the energy sector, gas production fell 0.5pc week-on-week to 2,947mmcfd due to lower output from key fields, while oil production rose 5.2pc to 70,294 barrels per day.

Debt market developments reflected tightening liquidity conditions. The government rejected bids in the Pakistan Investment Bonds (PIB) auction as yields climbed, while treasury bill yields increased by 40 to 80 basis points, with most participation in short-term tenors. The rupee remained broadly stable, closing at Rs278.77 against the dollar.

Sector-wise, banking, exploration and production, cement, fertiliser and oil marketing companies weighed heavily on the index. Limited positive contributions came from tobacco and automobile assemblers.

At the stock level, major laggards included United Bank Ltd, National Bank of Pakistan, Pakistan Petroleum Ltd, Fauji Fertiliser Company and Oil and Gas Development Company. Gains were led by Indus Motor Company, Honda Atlas Cars, Millat Tractors, Pakistan Tobacco Company and Pakistan Oilfields.

Trading activity weakened during the week, with average volumes declining 19.2pc to 974 million shares and traded value falling 21.1pc to $129m.

AKD Securities Ltd also reported a 4.5pc weekly decline, attributing the downturn to the collapse of US-Iran diplomatic efforts and a surge in oil prices, with Brent crude reaching $126 per barrel during the week. The SBP’s rate hike, the first in over two and a half years, further dampened investor sentiment amid expectations of persistent inflation.

Nevertheless, some positive developments offered support. The International Monetary Fund’s Executive Board is scheduled to meet on May 8 to consider approval of a $1.2bn tranche under the ongoing two programmes. Additionally, SBP’s foreign exchange reserves rose to $15.8bn, up $730m week-on-week.

Looking ahead, analysts say market direction will remain closely tied to geopolitical developments and oil price trends. Easing tensions and lower energy costs could revive investor confidence, while external financing inflows, including

IMF support, may provide further stability.

The KSE-100 index is currently trading at a price-to-earnings ratio of 6.9x-7.6x, offering a dividend yield of around 6.7pc, indicating relatively attractive valuations despite prevailing risks.

Published in Dawn, May 2nd, 2026