The Pakistan Stock Exchange (PSX) witnessed a remarkable surge, breaking through the 133,000-point mark, sending ripples of excitement and optimism through the financial markets. This milestone was achieved amidst a backdrop of positive sentiments and favorable economic conditions. Analysts attributed this surge to the implementation of a favorable taxation regime for equities, which was a key highlight following the recent passage of the federal budget.
The benchmark KSE-100 index experienced a significant increase, rising by 1,771.48 points to reach 133,720.54 points, marking a notable 1.34% increase from the previous close. Throughout the trading day, the index hit an intraday high of 133,862.01 points, eventually settling at 133,370.14 points, reflecting a substantial gain of 1,421.08 points or 1.08% compared to the previous day’s closing figures.
The PSX had already commenced the new fiscal year on a bullish note, showcasing resilience and strength in the face of economic uncertainties. The market’s robust performance in the preceding week, with a 6.1% gain in the KSE-100 index, set the stage for the continued momentum that led to the record-breaking rally extending for the seventh consecutive session.
Awais Ashraf, the director of research at AKD Securities, emphasized the significance of the favorable taxation structure for equities in attracting investor interest. He pointed out that the increasing likelihood of equities outperforming other asset classes, coupled with positive macroeconomic indicators and lower inflation rates, has steered investments towards the stock market. Ashraf highlighted the ongoing monetary easing policies, driven by factors such as declining inflation, fiscal discipline, a robust external account, and a focus on structural reforms, all of which have elevated equities as an attractive investment option.
Yousuf M. Farooq, research director at Chase Securities, provided valuable insights into the market dynamics, categorizing the current phase as Phase 2 of the bull run. He noted the rising participation of retail investors, increased trading volumes, and the broad-based gains witnessed across various sectors. Farooq attributed the burgeoning investor confidence to multiple factors, including the recent passage of the Finance Act 2025-26, geopolitical stability, optimism surrounding circular debt resolution, and the potential trade deal with the United States.
In advising retail investors, Farooq emphasized the importance of maintaining a long-term investment perspective, aligning investments with individual risk appetites, and avoiding reactionary behavior to short-term market fluctuations. While acknowledging the emergence of speculative trends within the market, typical of a bullish phase, Farooq underscored the overall reasonable valuations, cautioning investors to manage their return expectations as market returns are anticipated to normalize compared to the exceptional gains observed in recent years.
The optimistic market sentiment has been further bolstered by the stabilization of macroeconomic indicators. Inflation rates have descended to a nine-year low of 3.2% in June, down from 3.5% in May, indicating a positive trend. Additionally, the trade deficit exhibited a narrowing trend, recording $2.3 billion in June, a 9% decrease from the previous month and a 3% decline year-on-year. The full-year trade deficit for FY25 stood at $26.3 billion, reflecting a 9% increase from the previous fiscal year.
The convergence of these favorable economic conditions, coupled with proactive policy measures and investor optimism, has propelled the Pakistan Stock Exchange to unprecedented heights, underlining its resilience and attractiveness as an investment destination. As the market continues to evolve and respond to dynamic global trends, investors are advised to maintain a cautious yet strategic approach, leveraging expert insights and market analysis to navigate the ever-changing landscape of the financial markets.
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