KARACHI: The stock market is expected to remain sensitive to oil prices and geopolitical tensions, with investors closely watching inflation trends, external account pressures and global oil prices.
Analysts said easing geopolitical tensions and falling crude prices improved sentiment during the outgoing week. Still, concerns over the widening trade and current account deficits may keep investors cautious in the days ahead.
The benchmark index ended the week on a strong note, supported by renewed investor confidence and institutional buying. According to JS Research, the KSE-100 Index gained 2,248 points, or 1.4 per cent, on a week-on-week (WoW) basis as optimism grew over possible negotiations aimed at easing regional geopolitical tensions. Brent crude oil prices fell 6 per cent during the week to $103 per barrel, which analysts viewed as positive for Pakistan’s inflation and external account outlook.
Syed Danyal Hussain, an analyst at JS Research, said the market reacted positively to lower international oil prices and improving global sentiment. He noted that Pakistan’s foreign exchange reserves also provided support after State Bank of Pakistan reserves increased by $1.2 billion WoW to $17.1 billion due to inflows from the International Monetary Fund (IMF).
However, macroeconomic indicators painted a mixed picture. Pakistan’s current account returned to a deficit of $324 million in April 2026 after posting a surplus in the previous month. The deterioration mainly stemmed from a widening trade gap driven by higher energy imports. The cumulative current account deficit for the first 10 months of FY26 reached $252 million.
Trade data also remained a concern for investors. Pakistan’s monthly trade deficit crossed $4 billion in April 2026, the highest level in 46 months. Imports rose 7.0 per cent year-on-year (YoY), while the oil import bill climbed to a 44-month high. As a result, the cumulative trade deficit widened 20 per cent YoY to $32 billion during the first 10 months of FY26.
Meanwhile, Pakistan’s real effective exchange rate rose to 105.8 in April 2026, the highest level in seven years. Analysts said the stronger currency index could weigh on export competitiveness if the trend continues.
The debt market also remained active during the week. In the latest treasury bill auction, the government raised Rs702 billion against a target of Rs450 billion. Yields increased between 9 basis points (bps) and 86bps across various maturities, indicating expectations of a possible increase in the policy rate in the upcoming monetary policy review.
Nabeel Haroon, vice president for international equity sales at Topline Securities, said improving sentiment was mainly linked to easing tensions between Iran and the US and the decline in international oil prices. He said lower crude prices usually benefit Pakistan by reducing pressure on the import bill and inflation expectations.
Haroon added that foreign direct investment slowed during April 2026, with net inflows falling to $54 million compared with $168 million in March. He also pointed to rising treasury bill yields as a signal that the market expects tighter monetary conditions ahead.
Investor activity remained healthy during the week. Average daily trading volumes stood at 498 million shares, while average daily traded value reached Rs24 billion. Institutional investors largely supported the market. Insurance companies emerged as major buyers with net equity purchases of $8.4 million, followed by mutual funds at $4.9 million and banks at $3.3 million.
On the other hand, foreign corporates remained net sellers during the week, offloading equities worth $12 million. Local companies also sold shares valued at $2.9 million.
Analysts said the market direction next week will largely depend on movement in global oil prices and further developments on the geopolitical front. Investors are also expected to monitor external account data closely as rising imports and trade pressures continue to pose risks to macroeconomic stability.
