KARACHI: For no apparent positive triggers, the Pakistan Stock Exchange (PSX) extended its bullish spell in the first session of the week as bulls continued their charge, catapulting the benchmark KSE-100 index to an intraday high of 184,000, a gain of almost 5,000 points in a single session on Monday.
The index, however, settled at 182,408.24, up 3,373.31 points or 1.88 per cent. The strong close near the day’s peak underscored firm investor confidence and signalled a buoyant start to the year for equities, maintaining the record-setting spree for a third consecutive session.
Replying to Dawn’s queries about the factors behind this unprecedented bullish persistence despite economic challenges, particularly the declining exports and widening trade deficit, Topline Securities Ltd Chief Executive Mohammed Sohail said the non-stop buying by local funds is boosting share prices. Investors expect a further rate cut in the coming weeks, as the Consumer Price Index-based inflation decelerated to 5.6pc in December, down from 6.1pc in November.
“This rally is mainly driven by excess cash liquidity available in the system in the absence of any other good alternative,” he remarked.
Ample liquidity, rate cut hopes drive
unprecedented rally
The brokerage house noted in its market commentary that the local bourse kicked off the new year on a powerful note, as aggressive buying by local mutual funds set the tone, driving the market into a decisive bullish session. Optimism ahead of the upcoming monetary policy meeting over a potential rate cut fuelled risk appetite, driving broad-based market participation.
The top positive contributors to the index were United Bank, Habib Bank, Engro Holdings, MCB Bank, Engro Fertiliser, and Fauji Fertiliser, which collectively added 1,853 points.
Market participation turned robust as trading volume surged 24.36pc to 1.38 billion shares, while traded value rose 21.37pc to Rs77.9bn.
Answering a question about what is driving the unprecedented rally at the PSX amid growing regional tensions, Ali Najib, Deputy Head of Trading at Arif Habib Ltd, believed abundant market liquidity and expectations of a declining interest rate environment were the key factors fuelling the record-setting rally, encouraging a strong equity rerating.
“Investor confidence around IMF continuity, policy stability, and reform expectations is outweighing prevailing economic challenges and regional tensions,” he added.
Mr Ali was of the view that investor sentiment has shifted decisively from fixed income to equities in search of superior real returns.
“The optimism surrounding privatisation initiatives, market structure improvements, and broader reforms has acted as a key catalyst,” he opined.
He said that market participants were increasingly forward-looking, discounting near-term macroeconomic weaknesses such as declining exports and a widening trade deficit.
Commenting on the lack of impact of the GDP slowdown in the first quarter of FY26 compared to the preceding period, he believed the market was essentially looking beyond short-term economic softness.
“Expectations of an economic recovery and sustained policy support are the main forces driving the index to new highs despite weaker headline growth numbers,” Mr Ali added.
On the sectoral front, CY24 fertiliser offtake reached a record 6.73 million tonnes, driven by a strong December, defying expectations of surplus inventories and exports. Consequently, urea inventories are projected to decline sharply to 208,000 tonnes. Company-wise, FFC’s offtake declined 9pc YoY, while Engro Fertiliser grew 9pc YoY, and Fatima Fertiliser posted a robust 19pc YoY growth to a record level.
Analysts believe the rally signals further upside, with the strong bullish trend remaining firmly intact, supported by improving macroeconomic indicators and expectations of stronger corporate earnings in the coming weeks.
They view 180,000 as the immediate support level, should any corrective move emerge around current levels.
