Pakistan equity markets kicked off the new fiscal year 2025–26 with remarkable energy and optimism, breaking records and crossing historic benchmarks. On July 1, 2025, the benchmark KSE-100 Index surged past the 128,000-point level for the first time in its history, marking a new era for investors and economic observers alike. This spectacular rally reflects both growing investor confidence and improving macroeconomic fundamentals within the country.
Historic Opening: A Day to Remember
The KSE-100 Index opened the new fiscal year with a bang, registering an unprecedented intraday gain of over 2,400 points, and closing the day at approximately 128,199.43 points, up 2,572.11 points or about 2.05% from the previous day’s close. This milestone reflects not only positive investor sentiment but also the structural shifts in Pakistan’s economy that have been gaining momentum over the past several months.
The Pakistan Stock Exchange (PSX) has shown a stellar performance over the past fiscal year as well. In FY2024–25, the KSE-100 Index appreciated by over 60%, one of the best performances in the world, with even stronger gains in local currency terms. This bullish trend has been fuelled by a mix of macroeconomic stability, reforms, and improved fiscal indicators.
Macroeconomic Tailwinds Boosting Investor Confidence
Several interrelated factors have contributed to the PSX’s extraordinary start to FY2025–26:
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Tamed Inflation:
Perhaps the most critical development has been a dramatic reduction in inflation. June 2025 consumer price index (CPI) numbers are reported to have dropped to around 3.2%–3.4%, down from an average of over 23% in FY2024. This disinflation trend has boosted investor confidence in long-term growth and allowed expectations of lower interest rates in the coming months. -
Improving External Accounts:
Pakistan’s foreign exchange reserves have improved significantly, reportedly crossing the $14 billion mark, thanks to external inflows and controlled imports. Crucially, China rolled over loans worth $3.4 billion, providing much-needed breathing space for the balance of payments. -
Monetary Policy Optimism:
With inflation cooling and the rupee stabilizing, market participants widely expect the State Bank of Pakistan (SBP) to reduce its benchmark interest rate in the coming months. A lower interest rate regime would further enhance liquidity in the markets and stimulate corporate earnings. -
Fiscal and Structural Reforms:
The recently announced federal budget and policy measures have been viewed as growth-supportive and investor-friendly. Reforms aimed at expanding the tax net, reducing energy sector circular debt, and improving the ease of doing business have all contributed to a more positive market outlook. -
Political Stability and IMF Compliance:
A relatively stable political environment, along with continued engagement with the International Monetary Fund (IMF) under the Extended Fund Facility, has strengthened global investor confidence in Pakistan’s reform trajectory. Compliance with IMF structural benchmarks also reassures markets about fiscal discipline and macroeconomic consistency.
Market Breadth and Sectoral Performance
The rally has been broad-based. Leading the charge were sectors like banking, fertilizers, automobiles, cement, and oil & gas, all of which saw substantial gains. With declining inflation and lower expected interest rates, banks are witnessing improved spreads, while lower input costs have boosted margins for industrial companies.
Daily trading volumes have also soared. The PSX is now averaging over 1 billion shares traded daily, with a trading value exceeding Rs. 44 billion—signs of deepening liquidity and growing participation from both institutional and retail investors.
A Broader Bull Run?
The market’s recent momentum is being interpreted by analysts as the beginning of a “Phase 2” bull market, characterized by widespread public participation, diversified sectoral involvement, and a shift from short-term speculative trading to long-term investment. Many analysts now see the KSE-100 index targeting 135,000–140,000 points in the medium term if current economic trends persist.
However, caution is also advised. Markets remain vulnerable to global shocks, currency volatility, and unexpected political disruptions. Moreover, sustainable growth will depend on the government’s ability to deliver on reform promises, maintain macroeconomic stability, and further improve the business climate.
Investor Outlook: Cautious Optimism
The start of FY2025–26 has undeniably injected renewed enthusiasm into Pakistan’s capital markets. As economic indicators improve and investor participation broadens, the PSX appears to be entering a new phase of maturity and resilience. Long dormant in the eyes of global investors, Pakistan’s stock market is once again showing signs of becoming a promising frontier for returns – provided the current momentum can be maintained.
In summary, the KSE-100 index’s crossing of 128,000 marks not just a statistical milestone, but a psychological one. It tells a story of resilience, reform, and revival. The path ahead may still have challenges, but for now, the bulls are clearly in control.
Reference: نئے مالی سال کا شاندار استقبال:پاکستان اسٹاک مارکیٹ نے ایک لاکھ 28ہزار کی حد عبور کر لی
