KARACHI: The outlook of the stock market for the coming week remains cautiously positive as easing geopolitical risks, stable foreign exchange reserves and supportive regulatory signals help restore confidence.
Investors are likely to stay selective but engaged. Improved macro indicators and expectations of reform continuity should keep sentiment steady. The market may attempt to consolidate after recent volatility. Banking liquidity measures and signs of foreign interest could support index stability, although global cues and earnings updates will remain key triggers.
According to AKD Research, the broader trajectory remains constructive despite near-term fluctuations. “We foresee the positive momentum in the KSE-100 to continue due to improving macros and continuous focus on reforms amid political stability,” the brokerage said. It added that investor sentiment is expected to improve on the likelihood of foreign portfolio and direct investment inflows, driven by improving relations with the US and the Kingdom of Saudi Arabia.
The market trended lower for most of the week before staging a sharp rebound in Friday’s session. The KSE-100 index fell by 4,992 points on a week-on-week basis, down 2.6 per cent, to close at 184,174 points. The index recovered 1,836 points in the final session.
Selling pressure emerged after the State Bank of Pakistan (SBP) kept the policy rate unchanged at 10.5 per cent, defying expectations of a cut. Rising geopolitical tensions between the US and Iran added to uncertainty. Disappointing quarterly results from Fauji Fertilizer Company also weighed on sentiment.
Mood improved later in the week as geopolitical concerns began to ease. Support also came from positive domestic developments. The banking sector recorded the second-highest annual growth in deposits, reaching Rs37.4 trillion by year-end. The central bank reduced the average cash reserve requirement for banks from 6.0 per cent to 5.0 per cent to encourage private sector credit growth. Market participation improved modestly, with average daily traded volume rising 3.0 per cent week on week to 1.4 billion shares.
On the external front, the SBP’s foreign exchange reserves increased by $13 million during the week to $16.1 billion as of January 23. The rupee appreciated marginally by 0.03 per cent week-on-week (WoW), closing at 279.77 against the US dollar.
Other notable developments included the government setting a 5.1 per cent gross domestic product growth target for the federal budget for fiscal year 2026-27. Brent crude prices approached a six-month high amid Iran-related concerns.
The State Bank revised its GDP growth outlook upward to as high as 4.75 per cent for the fiscal year 2026. The International Monetary Fund (IMF) chief praised Pakistan’s reform efforts. Circular debt inflows declined to Rs75 billion in the first half of fiscal year 2026.
Sector performance remained mixed. Property, jute, vanaspati and allied industries, and automobile assemblers led gains, rising 10.0 per cent, 1.1 per cent, 0.9 per cent and 0.3 per cent week on week. Fertiliser stocks underperformed, falling 6.9 per cent. Chemicals, insurance, paper and board, and textile spinning also posted losses of between 3.9 per cent and 4.2 per cent. In terms of flows, individuals and foreigners emerged as net buyers, with net purchases of $25.7 million and $17.8 million. Mutual funds and banks remained net sellers.
Syed Danyal Hussain, an analyst at JS Research, said the market stayed under pressure due to the unexpected policy decision and geopolitical stress. He noted that a late-week recovery followed government relief measures for industry, including a 300 basis points (bps) cut in the Export Finance Scheme rate and a reduction in power tariffs by Rs4.04 per unit.
He added that the Federal Constitutional Court’s decision to uphold the super tax would support revenue, with the Federal Board of Revenue (FBR) expected to generate over Rs300 billion in fiscal year 2026. He also highlighted early debt repayments of more than Rs3.65 trillion over the past 14 months and stable central bank reserves as supportive factors.
