Softer inflation, falling oil prices and lower bond yields fuel bullish momentum at the Pakistan Stock Exchange
KARACHI: The benchmark KSE-100 Index of the Pakistan Stock Exchange (PSX) posted an impressive weekly gain of 5,801 points, extending its record-breaking rally as easing inflation, lower international oil prices and improving macroeconomic indicators boosted investor confidence.
The benchmark index closed the week at 185,372 points, registering a 3.23 percent week-on-week increase as investors continued to accumulate shares across key sectors amid expectations of an improving economic outlook.
Market analysts attributed the rally primarily to declining global crude oil prices following the easing of geopolitical tensions in the Middle East, coupled with sustained bullish sentiment in the local equity market.
Softer inflation boosts market sentiment
Investor confidence received additional support after Pakistan’s Consumer Price Index (CPI) inflation eased to 11.1 percent year-on-year in June 2026, compared with 11.7 percent recorded in May.
The moderation in inflation has strengthened expectations that monetary conditions could become more supportive for economic growth and corporate earnings in the coming months.
Trade deficit widens sharply
Despite the strong equity market performance, Pakistan’s external trade balance came under pressure during June.
The country’s trade deficit widened to $4.5 billion, representing a 75.4 percent month-on-month increase from $2.6 billion in May, largely due to a significant rise in imports.
Foreign exchange reserves recover
Pakistan’s total liquid foreign exchange reserves improved during the week.
As of June 24, 2026, total reserves stood at $22.05 billion, comprising $16.53 billion held by the State Bank of Pakistan and $5.52 billion maintained by commercial banks.
The reserves increased 2.6 percent week-on-week, recovering after the previous week’s sharp decline.
Lower bond yields support equities
The government’s latest Pakistan Investment Bonds (PIB) auction also strengthened market sentiment.
The government raised Rs438 billion, exceeding its target of Rs350 billion, while cut-off yields across various maturities declined by 47 to 70 basis points, indicating easing borrowing costs and improving investor appetite for government securities.
Energy sector sends mixed signals
Weekly economic data presented a mixed picture for Pakistan’s energy sector.
Natural gas production edged up 0.5 percent to 2,971 million cubic feet per day, supported by higher output from the Mari, Uch and Qadirpur fields.
However, production from the Shewa field dropped sharply to 21 mmcfd from 101 mmcfd, reportedly due to disruptions caused by the SNGPL pipeline rupture.
Meanwhile, petroleum sales remained weak in June, falling 20 percent year-on-year to 1.26 million tons, reflecting subdued fuel demand.
Refinery uplift also declined 8.1 percent compared with the same month last year, mainly because of lower demand for high-speed diesel and furnace oil.
On the fertilizer front, provisional urea offtake increased 2 percent year-on-year to 592,000 tons, although overall demand remained relatively subdued after dealers built inventories earlier in anticipation of price increases.
Rupee remains stable
The Pakistani rupee posted a marginal appreciation against the US dollar during the week, strengthening 0.03 percent to close at Rs278.12 per dollar, reflecting relative stability in the foreign exchange market.
Positive outlook maintained
Market analysts expect the KSE-100 Index to maintain its positive momentum in the coming week, although they cautioned that investor sentiment will continue to depend on geopolitical developments, inflation trends and broader macroeconomic indicators.
At current levels, the benchmark index is trading at a price-to-earnings (P/E) ratio of 8.5 times, while offering an attractive dividend yield of 5.9 percent, factors that continue to support valuations and investor interest in Pakistan’s equity market.