KARACHI: The outlook for the coming week remains positive, with momentum in the KSE-100 expected to continue amid supportive macro signals, easing monetary conditions and improving external confidence.
According to AKD Research, sentiment should strengthen further on expectations of foreign portfolio and direct investment inflows, helped by better relations with the US and Saudi Arabia, falling fixed income yields and the absence of attractive alternative investment avenues.
Valuations remain compelling, with the index trading at a multiple of 8.1 times and offering a dividend yield of 6.5 per cent. The successful third tranche disbursement under the IMF’s Extended Fund Facility and Resilience and Sustainability Facility, limited flood impact and improved credit ratings by global agencies also underpin the outlook for the week ahead.
The market extended its bullish run during the outgoing week, driven mainly by a surprise 50 basis points (bps) cut in the policy rate by the State Bank of Pakistan, which lowered the benchmark rate to 10.5 per cent. The decision defied expectations of the status quo and boosted investor confidence. Additional support came from the current account posting a surplus of $100 million in November 2025.
The KSE-100 index touched an all-time high closing level of 171,960 points during the week before mild profit-taking on the final session. It closed at 171,404 points, up 1,539 points or 0.91 per cent week on week (WoW). Market activity softened, with average daily traded volume falling 5.6 per cent to 1.2 billion shares. Average daily traded value stood at around Rs50 billion, or $176 million.
On the macro front, textile exports during the first five months of fiscal year 2026 rose 3 per cent year on year to $7.8 billion, while petroleum imports declined 2.0 per cent to $6.4 billion. State Bank foreign exchange reserves increased by $1.3 billion to $15.9 billion as of December 12, following IMF inflows. The rupee appreciated marginally by 0.02 per cent week on week, closing at 280.25 against the US dollar.
Other notable developments included the finance minister ruling out a mini-budget, progress on extending the Pakistan-Uzbekistan preferential trade agreement, renewed talks with Russia on an oil deal, prioritisation of brownfield refinery upgrades under the SIFC, and advancing discussions with China on a $2.2 billion industrial complex at Port Qasim.
Sector-wise, jute, real estate investment trusts, commercial banks, closed-end mutual funds and engineering stocks led gains, rising between 3.0 per cent and 5.6 per cent WoW. Woollen, modarabas, synthetic and rayon, textile spinning and vanaspati sectors underperformed, declining up to 5.9 per cent.
Individuals were the main net buyers, with inflows of $16.7 million, while foreigners and insurance companies recorded net selling of $12.7 million and $8.2 million, respectively. RMPL, PIBTL, NBP, UBL and DCR were the top gainers, while SSGC, BNWM, PIOC, IBFL and PGLC lagged.
Syed Danyal Hussain of JS Research said sentiment improved sharply after the policy rate cut, noting stable inflation, easing yields and a recovery in large-scale manufacturing, which grew 8.3 per cent year-on-year (YoY) in October 2025.
He added that despite a current account surplus in November, the cumulative balance for five months remained in deficit, while foreign direct investment declined to $927 million.
Nabeel Haroon of Topline Securities also highlighted the rate cut as the key trigger for gains, alongside the current account surplus and higher real effective exchange rate, reinforcing cautious optimism for the weeks ahead.
