PSX Ends Higher Amid Low Inflation and Market Optimism
KSE-100 Surges 1,147 Points on Rate Cut Hopes and Circular Debt Deal
Stock Market Overview
Pakistan Stock Exchange (PSX) witnessed a strong performance this week, driven by improved investor sentiment, declining inflation, and expectations of monetary policy easing. The KSE-100 index closed at 114,399 points, posting a weekly gain of 1,147 points (1.01%) as investors anticipated a rate cut by the State Bank of Pakistan (SBP) and welcomed progress in resolving circular debt issues.
Key Market Drivers
- Inflation Declines: February 2025 saw inflation drop to a 113-month low of 1.5% YoY, the lowest since September 2015.
- T-Bill Auction Trends: Yields on three-month papers remained steady, while six-month and 12-month yields saw a minor decline.
- Circular Debt Resolution: The government secured a Rs1.25 trillion loan at 1% below Kibor from commercial banks to address energy sector dues.
- SBP Reserves: Increased by $27 million, reaching $11.2 billion.
- Pakistani Rupee: Slight depreciation of 0.05%, closing at 279.82 per USD.
Weekly Market Performance
Monday: A Rocky Start
The trading week began on a bearish note, with the KSE-100 index plunging to an intra-day low of 111,829 points before recovering slightly to close at 111,987 points, registering a massive drop of 1,265 points. Investors remained cautious ahead of the IMF’s first review under the $7 billion Extended Fund Facility (EFF).
Tuesday: Market Rebounds on Inflation Data
A significant rebound followed on Tuesday as investors reacted positively to the decade-low inflation rate of 1.5%. Strong earnings expectations in the banking, fertilizer, and oil sectors further boosted confidence, resulting in a 757-point gain.
Wednesday: Volatility Returns
The KSE-100 initially surged 600 points but later reversed gains due to profit-taking, closing 490 points lower.
Thursday: Strong Rally
Renewed investor confidence propelled a 1,459-point surge, marking one of the best sessions of the week.
Friday: Bullish Close
Investors continued to bet on a potential SBP rate cut, leading to another 686-point increase, closing the week at 114,399 points.
Sectoral Performance
Top Performing Sectors
- Exploration & Production: +656 points
- Cement: +451 points
- Oil Marketing Companies (OMCs): +346 points
- Power: +177 points
- Glass: +114 points
Lagging Sectors
- Technology & Communication: -122 points
- Textile: -97 points
- Autos: -89 points
- Commercial Banks: -48 points
Top Gaining Stocks
- Pakistan Petroleum (PPL): +290 points
- PSO: +247 points
- OGDC: +236 points
- Hubco: +185 points
- Fauji Cement: +156 points
Top Losing Stocks
- Systems Limited: -84 points
- Millat Tractors: -77 points
- Mehmood Textile Mills: -75 points
- Bank AL Habib: -74 points
- UBL: -64 points
Economic Highlights
Trade Deficit Widens
Pakistan’s trade deficit for the first eight months of FY25 widened by 6.3% YoY to $15.8 billion.
Oil Marketing Companies (OMC) Performance
Sales of OMCs grew 4% YoY, indicating strong demand for petroleum products.
Agriculture Sector Weakness
Urea and Di-Ammonium Phosphate (DAP) sales dropped 37% and 64% YoY, respectively, reflecting challenges in the agriculture sector.
Foreign Investment Trends
Foreigners remained net sellers, offloading $5.3 million in stocks compared to $6 million last week.
Future Outlook
The upcoming SBP monetary policy announcement is expected to play a crucial role in determining market direction. Given the record-low inflation, investors anticipate a rate cut, which could further fuel bullish sentiment in the stock market.
Moreover, progress on IMF negotiations and further developments in resolving circular debt could provide additional stability.
Frequently Asked Questions (FAQs)
1. Why did PSX perform well this week?
The decade-low inflation of 1.5%, expectations of an SBP rate cut, and a Rs1.25 trillion circular debt resolution deal fueled investor confidence.
2. Which sectors performed best this week?
Top-performing sectors included exploration & production, cement, oil marketing companies, power, and glass.
3. What caused market volatility during the week?
Initial IMF review concerns, coupled with profit-taking on Wednesday, led to fluctuations in market performance.
4. What is the outlook for the stock market next week?
Investors are eagerly awaiting SBP’s monetary policy decision and IMF’s review outcome, both of which could impact market momentum.
5. Did foreign investors buy or sell this week?
Foreign investors were net sellers, offloading $5.3 million worth of stocks, continuing last week’s selling trend.
