Pakistan’s equity market is positioned for a potential recovery driven by improving domestic economic indicators and the upcoming October 26 monetary policy decision, despite a highly volatile week that saw the benchmark index plunge. The State Bank of Pakistan is widely anticipated to maintain current interest rates, though brokerage reports from Arif Habib Limited and AKD Securities suggest that any de-escalation in Middle East hostilities could cool global crude prices, subsequently providing critical room for future monetary easing and supporting equity valuations.
The KSE-100 Index contracted by 2.4% week-on-week to close at 162,375, largely pressured by heightened geopolitical uncertainty, ongoing regional conflicts, and Brent crude prices surging 6.4% to $114.9 per barrel. The broader KSE-All Share Index similarly fell 2.2% to 98,620 points, bringing the year-to-date declines for the KSE-100 and KSE-All Share indices to 6.7% and 5.7%, respectively. The banking sector led the downturn by erasing 925 points from the benchmark, heavily followed by technology, investment banks, and cement. Refineries and communications emerged as the worst-performing sectors overall, while modarabas and the sugar industry managed marginal gains.
Individual corporate performances reflected the broader market anxiety, with prominent large-cap stocks dragging the index lower. ENGROH stripped 489 points from the benchmark, while Systems Limited, Lucky Cement, and Attock Refinery applied significant downward pressure. Conversely, positive, albeit limited, contributions were recorded from companies such as PSEL, THCCL, and Unilever Pakistan Foods. Average weekly trading volumes fell 12.6% to 393 million shares, though the average traded value climbed 7.3% to $69.7 million. Institutional participants remained cautious, with mutual funds and foreign investors offloading $10.2 million and $5.7 million in equities, respectively, leaving individual domestic investors to absorb the sell-off through $14.0 million in net purchases.
Also Read: FBR’s Credibility Collapse!
On the macroeconomic front, the national economic growth estimate for FY2025-26 was officially adjusted downward to 3.65% from a provisional 3.70%, finalizing the total size of the economy at Rs126.4 trillion with a per capita income of $1,896. Looking ahead, the World Bank projects 3.8% GDP growth for FY2026-27 alongside an anticipated inflation rate of 8.2%. Externally, total liquid foreign exchange reserves slipped slightly by $30.3 million to $26.83 billion, leaving the country with a 3.01-month import cover, while the rupee remained largely stable, appreciating a fractional 0.03% to close at Rs276.82 against the US dollar.
The energy and agricultural sectors presented a mixed operational picture during the period. September electricity generation grew 5% year-on-year, though heightened reliance on expensive imported fuels pushed generation costs up 32% to Rs9.35 per kilowatt-hour, prompting distribution companies to request a Rs2.56 positive fuel charge adjustment. Domestically, consumers saw some relief as motor spirit and high-speed diesel prices were slashed by Rs12.5 and Rs5.2 per litre following global refinery price declines. Concurrently, agricultural indicators showed resilience, with cotton arrivals surging 8% to 4.081 million bales and urea sales spiking 42% ahead of the Rabi planting season.
As the market digests escalating power sector circular debt, which has now reached Rs1.7 trillion, and monitors the prequalification of bidders for state utility privatizations, immediate attention pivots to the September-quarter corporate earnings season. Despite recent macroeconomic turbulence and sustained geopolitical headwinds, analysts note that the KSE-100 Index currently trades at an attractive price-to-earnings multiple of 7.02 times and offers a robust dividend yield of 7.0%, positioning the bourse for a strong technical rebound if regional tensions stabilize.