By Moaaz Manzoor
The Pakistan Stock Exchange (PSX) ended the week on a firm footing — a rare calm in a market long defined by nervous energy.
Confidence, it seems, is making a quiet comeback. The catalyst? A blend of IMF assurance, steady macro indicators, and a perceptible easing of regional tensions.
The benchmark KSE-100 Index closed at 163,806 points, up 708 points (0.4%) week-on-week. The gain may look modest, but it’s significant for what it signals: a market regaining trust in the country’s economic direction.
Average trading volumes surged 34.5% to 1.83 billion shares, while value traded rose 1.4% to USD 198 million — numbers that show investors aren’t just dipping their toes; they’re wading back in.
IMF Agreement Revives Market Mood
The timing of Pakistan’s USD 7 billion Extended Fund Facility (EFF) and USD 1.3 billion Resilience and Sustainability Facility (RSF) progress couldn’t be better. The staff-level agreement reached this week with the IMF restored much-needed confidence that the reform agenda remains alive. Once approved by the Fund’s Executive Board, it will unlock around USD 1 billion under the EFF and USD 200 million under the RSF.
This is not just an accounting transaction — it’s a psychological boost. In Pakistan’s markets, sentiment often moves faster than fundamentals, and the IMF’s nod is often taken as an endorsement of stability.
Macro Indicators Offer Mixed Signals
The State Bank of Pakistan’s reserves edged up slightly to USD 14.44 billion, while the rupee held stable at 281.10 per dollar. But the broader macro picture is still patchy.
The trade deficit widened to USD 3.4 billion in September, a 33.8% year-on-year jump to USD 9.4 billion in 1QFY26 — a reminder that global and domestic cost pressures are still alive.
Yet, there are green shoots. Refinery throughput excluding furnace oil rose 21.6% YoY, and high-speed diesel demand jumped 32.1%, a clear indicator of reviving domestic activity. Oil production, too, climbed 1.3% WoW to 65,301 barrels/day, driven by improved output from the Sharf, Pasakhi, and Makori East fields.
The government’s successful debt auctions — PKR 506.7 billion raised in PIBs and PKR 775.9 billion in T-Bills — reinforced confidence that the market remains liquid and that investors see stability ahead, not chaos.
Sectoral Drivers and Market Psychology
The biggest push came from banks, contributing 904 points, followed by power, technology, miscellaneous, and cement. Scrips like UBL, HUBC, BOP, LUCK, and MEBL led the gains, while fertilizer, E&P, and OMCs lagged.
This sectoral performance tells a story: investors are rotating toward high-yielding, dividend-paying stocks — a typical move when confidence returns but uncertainty still lurks.
Analysts at AKD Securities and Arif Habib Limited agree that the IMF’s staff-level agreement, combined with a stronger credit outlook and lower fixed-income yields, has provided breathing room. “Investor sentiment is expected to improve further as foreign portfolio inflows return, driven by better ties with the US and Saudi Arabia,” AKD Securities noted, citing the KSE-100’s “attractive valuation” at 7.3× earnings and a 6.7% dividend yield.
Stability Over Euphoria
Still, not everyone is celebrating just yet. Ali Najib of Arif Habib Limited cautioned that the market endured volatile sessions before settling. “Participants remained cautious amid persistent inflationary pressures, while the upcoming monetary policy meeting is likely to maintain a status quo stance,” he said.
Syed Zafar Abbas of Zahid Latif Khan Securities echoed a similar sentiment: “The PSX touched an all-time high of around 169,000 points before closing near 164,000. The market appears to be entering a correction phase amid inflation concerns and border tensions. A rate cut at this stage would come as a major surprise.”
In short, the PSX may be learning to breathe again — slowly, rhythmically, and without panic.
The fundamentals are still fragile, but confidence, once rekindled, can be a powerful economic force.