The Pakistan Stock Exchange (PSX) witnessed an electrifying trading session on Friday, with the benchmark KSE-100 index soaring by over 1,200 points in intraday trading. The index closed at 115,057.71, marking an impressive rise of 1,220.97 points (1.05%), reflecting newfound investor confidence.
Key Drivers Behind the Rally
The market’s upward trajectory was largely driven by two major developments:
- Verdict in Al-Qadir Trust Case:
The conviction of former Prime Minister Imran Khan and his spouse Bushra Bibi in the £190 million Al-Qadir Trust case seemed to ease political uncertainty. Analysts interpreted the verdict as a sign of reduced political noise, allowing the market to focus on improving macroeconomic fundamentals.- Awais Ashraf, director of research at AKD Securities, highlighted that disinflationary trends and a stabilized external account position could lead to a reduction in interest rates. This, in turn, would encourage a shift from fixed-income instruments to equities.
- Economic Indicators Shine:
Positive economic data further fueled investor optimism:- Current Account Surplus: December recorded a surplus of $582 million, boosting market sentiment.
- Decline in SPI: The Sensitive Price Index (SPI) showed a drop over the past week, hinting at easing inflationary pressures.
Yousuf M. Farooq, director of research at Chase Securities, predicted a stable inflation trajectory supported by a steady currency and balanced current account. He added that interest rates could potentially fall to single digits within FY25 if fiscal discipline is maintained.
Political and Economic Context
Earlier in the day, Judge Nasir Javed Rana announced the much-anticipated verdict in the Al-Qadir Trust case. Imran Khan was sentenced to 14 years in prison, while Bushra Bibi received a seven-year term. Fines amounting to Rs1 million for Imran and Rs500,000 for Bushra were imposed, with additional jail time for non-payment.
While the verdict provided a momentary respite from political instability, analysts warned that political volatility remains a key risk factor for the market. “Oil prices also present an upside risk to inflation,” Farooq added.
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Recent Market Performance
The bullish momentum on Friday came as a welcome reprieve after a turbulent session on Thursday, where concerns over a sharp contraction in the large-scale manufacturing (LSM) sector and ongoing political uncertainty had pushed the KSE-100 index below 114,000.
Yesterday’s caution stemmed from news of dialogues between the establishment and senior opposition leaders, raising fears of policy changes by the ruling coalition. However, with the conclusion of the graft case, investors appeared more optimistic about the market’s trajectory.
Outlook
With interest rates potentially easing and economic fundamentals stabilizing, analysts predict that the stock market will remain buoyant over the next year. However, political instability and external shocks, such as fluctuating oil prices, continue to pose risks.
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