KARACHI: The Pakistan Stock Exchange (PSX) opened the new calendar year on a strong footing on Thursday, with the benchmark KSE-100 index surging past the 176,000-point mark, as easing inflation and expectations of further monetary policy relaxation reignited investor appetite for equities.
The rally followed a brief pullback toward the end of CY25, with renewed optimism emerging after data showed a deceleration in Consumer Price Index (CPI)-based inflation for December. The inflationary slowdown strengthened expectations of an additional policy rate cut by the State Bank of Pakistan (SBP), which had surprised markets with a 50-basis-point reduction at its previous review after maintaining rates since May 2025.
Investor sentiment was further buoyed by recent political and economic signals. On Wednesday, Prime Minister Shehbaz Sharif launched the government’s Economic Governance Reforms, asserting that Pakistan had moved beyond “economic firefighting” following two years of difficult economic decisions. According to the government, these measures have helped restore macroeconomic stability.
With profit rates declining, investors have increasingly shifted funds from fixed-income instruments and bank deposits into equities in search of higher and quicker returns. This trend has underpinned the PSX’s strong performance over the outgoing year, culminating in the index setting a new record above 176,000 points.
In calendar year 2025, the KSE-100 index delivered a 51 per cent year-on-year return, ranking it as the second-best performing frontier market globally in dollar terms. Economic data also supported the upbeat outlook, as first-quarter GDP growth accelerated to 3.71 per cent, compared to 1.56 per cent in the same period last year. Although growth slowed from 6.1 per cent in the preceding quarter, analysts noted that the economy showed resilience despite fiscal tightening and flood-related disruptions.
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On the first trading day of the new year, the benchmark index climbed 2,301.17 points, or 1.32 per cent, to close at an all-time high of 176,355.49. Brokerage Topline Securities attributed the rally largely to buying by local institutional investors.
Major positive contributors included United Bank, Oil and Gas Development Company, Engro Holdings, Habib Bank, Lucky Cement and Bank Al-Habib, which together added 1,207 points to the index.
Amid falling profit rates, investors have turned to equities, moving funds from banks for higher and quicker returns.https://t.co/koZPfteCJN
— Dawn Business (@dawn_business) January 2, 2026
Ali Najib, Deputy Head of Trading at Arif Habib Ltd, said the year had begun on a strong note, reflecting sustained investor optimism about the economic outlook. He added that fresh institutional allocations, following Pakistan’s entry into the International Monetary Fund programme, continued to favor equities as a preferred asset class.
Market participation also strengthened, with trading volume rising 46.53 per cent to 1.4 billion shares, while traded value increased 9.48 per cent to Rs48.4 billion. Analysts believe the breach of the 175,000 and 176,000 psychological levels signals growing confidence, with 175,000 points expected to act as immediate support in case of a market correction.
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