The KSE-100 Index hit fresh highs on Thursday as strong foreign exchange reserve growth and mutual fund inflows lifted investor sentiment across the Pakistan Stock Exchange (PSX). The market’s rally was seen as a signal of growing confidence in the country’s financial outlook, driven by favorable fiscal developments and renewed foreign support.
The PSX’s benchmark KSE-100 Index closed at 138,665.49 points, rising by 2,285.53 points, or 1.68%, from the previous day’s close of 136,379.96. The index touched an intraday high of 138,943.47, reflecting a remarkable gain of 2,563.51 points or 1.88%. Meanwhile, the day’s low stood at 136,674.98, still marking a 295-point gain from the session before.
Investor enthusiasm surged following the announcement that Pakistan’s foreign exchange reserves had climbed by $5.12 billion, reaching $14.51 billion by the end of the 2024–25 fiscal year. This increase not only met but exceeded the IMF’s reserve target of $13.9 billion, marking a significant improvement from $9.39 billion on June 30, 2024.
Analysts noted the improvement in reserves came from a mix of commercial borrowings and multilateral support, including $3.10 billion from private lenders and over $500 million from global institutions. The reserves had previously dropped by $2.66 billion in late June, largely due to external debt repayments, but a timely rollover of $3.4 billion in Chinese loans reversed the pressure.
“This liquidity-backed rally will continue in the 140,000 plus range for KSE-100,” said independent analyst AAH Soomro. “Mutual funds have invested more than $50 million after the budget increased tax on money market returns, prompting a shift to equities.”
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Mutual Funds Steer Fresh Momentum
The shift in investment patterns following fiscal policy changes has played a key role in the latest surge. With higher taxes on returns from money market funds, mutual funds redirected over $50 million into the equity market. This reallocation has acted as a major catalyst in pushing the KSE-100 Index to record levels.
Market watchers believe that liquidity-driven buying from institutional investors will sustain the current momentum. Improved fiscal indicators, combined with the renewed inflows from China and international lenders, suggest the market may maintain its bullish run in the near term.
Wednesday’s session had already set the tone for this rally. On that day, the KSE-100 Index rose by 440.1 points, or 0.32%, closing at 136,379.96 points, up from 135,939.87 in the previous session. The index reached 137,232.11 at its highest and dropped to a low of 135,542.89, before closing firmly in positive territory.
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Future Outlook Positive Amid Global Headwinds
While global economic challenges continue, Pakistan’s improving current account balance, strengthened foreign support, and policy-driven capital reallocation have aligned to create a favorable local market environment.
According to analysts, further appreciation in reserves and continuous institutional buying may keep the KSE-100 Index on a positive trajectory. However, they caution that geopolitical risks, commodity price shocks, and interest rate decisions by the US Federal Reserve could introduce volatility in the months ahead.
Nonetheless, the recent performance reflects a restoration of investor confidence. The PSX has demonstrated resilience in the face of economic uncertainty, and with signs of fiscal consolidation and external support, the market appears poised to test the 140,000-point level — a psychological barrier that now seems within reach.
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