Karachi, December 27, 2025 – Analysts at Arif Habib Limited (AHL) have projected a strong but measured outlook for Pakistan’s equity market, forecasting that the benchmark KSE-100 Index could reach 208,000 points by December 2026. The optimistic projection is anchored in the market’s exceptional performance over the past three years and improving macroeconomic stability.
According to the analysts, Pakistan’s stock market is now entering a new phase characterized by sustainability, depth, and disciplined growth. After delivering remarkable returns of 49 percent year-to-date in CY25, an extraordinary 84 percent in CY24, and a solid 55 percent in CY23, the pace of gains is expected to moderate. However, this slowdown is viewed as healthy, reflecting a transition from rapid rallies to long-term structural strength.
AHL expects the KSE-100 Index to post a 21.6 percent upside from current levels, supported by improving earnings visibility and reasonable valuations. The index is currently trading at a forward price-to-earnings (P/E) ratio of 8.0x for CY26, while the outlook is based on a CY27 forward P/E of 8.3x and projected earnings growth of 5.9 percent in 2026 and 11.4 percent in 2027.
Several key drivers are expected to underpin market performance in 2026. These include sustained domestic liquidity in equities, strengthening foreign exchange reserves, and a contained current account deficit. Analysts also highlighted the expected completion of PIA’s privatization, along with accelerating reforms and restructuring of power distribution companies (DISCOs). Ongoing efforts to resolve circular debt in the power and gas sectors and supportive global commodity prices are also seen as positive catalysts.
Domestic liquidity remains the backbone of equity market performance, with strong local investor participation expected to continue anchoring the market. Inflation has eased significantly, with average CPI projected at 6.9 percent in FY26 and 8.0 percent in FY27. As a result, the policy rate is expected to remain broadly stable, averaging 10.5 percent in FY26 and easing slightly to 10.0 percent in FY27, supporting equity valuations.
Despite modest corporate earnings growth, equities remain Pakistan’s most attractive asset class. The KSE-100 is trading at a 52 percent discount to regional peers and about 22 percent below its 2010 valuation levels, while the market-cap-to-GDP ratio stands at 16 percent, below the 20-year average of 18.8 percent.
Looking ahead, analysts see 10 to 12 initial public offerings (IPOs) across key sectors in 2026, potentially raising Rs20–25 billion. This fresh capital formation is expected to deepen the market, enhance diversification, and attract broader investor participation, positioning Pakistan’s equity market for durable and resilient long-term growth.