The keyword monetary policy took center stage as the Pakistan Stock Exchange (PSX) witnessed a notable dip on Tuesday in SBP. Investors opted for caution ahead of the State Bank of Pakistan’s (SBP) interest rate announcement, resulting in profit-taking and a sharp fall in the benchmark index.
Index Retreats After Hitting Highs
The KSE-100 Index closed at 137,964.81 points, down by 1,415.24 points or 1.02% from the previous session. Earlier in the day, the index climbed to an intraday high of 140,331.01 — a rise of 950.96 points or 0.68%. However, selling pressure dragged it down to an intraday low of 137,636.37, marking a steep drop of 1.25%.
Analysts attributed the volatility to the looming SBP monetary policy announcement. Market participants appeared split between optimism over a potential rate cut and caution over possible surprises.
“Profit taking seems to be setting in at the 140,000 mark,” said Ahfaz Mustafa, CEO of Ismail Iqbal Securities. “Some investors are betting on a rate cut, while others prefer to wait. The uncertainty will end after the policy decision and SBP’s accompanying statement, which will set the tone for future actions.”
Policy Expectations in Focus
The Monetary Policy Committee (MPC) of the SBP is scheduled to meet on July 30. With inflation on the decline and the rupee relatively stable, analysts remain divided. Some predict a fresh rate cut, while others expect the SBP to maintain the status quo until economic indicators further stabilize.
The policy direction will be crucial for investor sentiment going forward. In recent sessions, the equity market showed bullish momentum, largely driven by improved macroeconomic indicators.
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Positive Economic Indicators Offer Support
Despite the market’s retreat, Pakistan’s broader economic picture continues to show improvement. According to the Ministry of Finance’s Monthly Economic Outlook, headline inflation for July is expected to remain between 3.5% and 4.5%. This projection reflects stable energy prices, a stronger rupee, and healthy supply chain conditions.
For the full fiscal year, inflation is projected at 4.49%, a nine-year low, compared to last year’s 23.4%. These numbers provide a supportive backdrop for a potential rate cut — a move that could further stimulate business activity.
Growth Driven by Agriculture and Trade
Pakistan’s GDP is forecasted to grow at 4.2% in FY2025, supported by a strong agricultural rebound and stable performance in manufacturing and external trade. The agriculture sector has benefited from improved water availability, greater fertiliser use, and higher agri-credit disbursements.
Meanwhile, large-scale manufacturing (LSM) grew 0.2% year-on-year in the first eleven months of FY2024. Exports surged by 11.7% in June to $2.75 billion, while imports also increased by 25.8% to reach $5.2 billion.
One of the most notable achievements was the current account surplus of $491 million in June, pushing the annual figure to $2.1 billion — the first surplus in 14 years and the highest in more than two decades.
US-Pakistan Trade Talks Continue
In parallel, trade negotiations between Pakistan and the United States continued. On Monday, both sides held discussions over tariff concessions, marking their second meeting within three days. Deputy Prime Minister Ishaq Dar and US Secretary of State Marco Rubio initially met on July 25 in Washington.
Finance Minister Muhammad Aurangzeb has now joined the talks in the US to help finalise the agreement. The tariffs, initially set to take effect this month, have been delayed until August to allow further dialogue. The US remains Pakistan’s top export market, accounting for about $5 billion in trade.
Previous Session Gains Short-Lived
On Monday, the KSE-100 Index had added 172.77 points, or 0.12%, closing at 139,380.06. The index touched a high of 140,149.23 and a low of 139,195.85 during that session. However, the gains proved short-lived as investor focus turned sharply toward Wednesday’s monetary policy verdict.
As anticipation builds, market players are bracing for a signal that could shape the economic and investment outlook for the months ahead.
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