The capital market experienced a significant rebound on Friday as investor sentiment recovered, driven by optimism surrounding de-escalating tensions between Pakistan and India, expectations of monetary easing, and the forthcoming International Monetary Fund’s (IMF) board review.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index reached an intraday peak of 114,250.59, marking an increase of 2,924.02 points, or 2.62%, from the previous closing figure of 111,326.57. The session’s lowest point was recorded at 112,820.07, still showing an advance of 1,493.5 points or 1.34%, indicating a robust reversal from Wednesday’s sharp decline of over 3%.
AAH Soomro, an independent investment and economic analyst, commented, “Intervention from the US to encourage direct communication and cooperation with India is giving hope to the market that military confrontation can be avoided. Hence, this is a peace rally that may continue if tensions subside and both sides collaborate.”
He further added, “Next week, we expect an interest rate cut and IMF board approval to continue the rally, assuming no political turmoil.”
The diplomatic improvement followed US Secretary Marco Rubio’s urging of both Islamabad and New Delhi to work towards a “responsible resolution that maintains long-term peace and regional stability in South Asia.” US State Department spokesperson Tammy Bruce stated that the US remains “in constant communication” with both governments.
The improved geopolitical outlook was further supported by investor expectations of monetary easing. The State Bank of Pakistan’s Monetary Policy Committee (MPC) is scheduled to convene on May 5, with analysts predicting a 50 basis-point reduction to bring the policy rate down to 11.5%.
“In its March monetary policy meeting, the SBP maintained a status quo stance, citing risks from volatile food and energy prices and external account pressures. However, it also acknowledged a continued decline in inflation and a sufficiently positive real interest rate on a forward-looking basis,” noted brokerage firm Arif Habib Limited.
“Given the sustained disinflationary trend and ample real interest rate cushion, we believe there is still room for a measured rate cut to support economic recovery without undermining macroeconomic stability.”
Additionally, attention is now focused on the IMF Executive Board meeting scheduled for May 9. The board will review Pakistan’s $1.3 billion disbursement request under the Extended Fund Facility (EFF), along with a request for modifications to performance criteria and a new arrangement under the Resilience and Sustainability Facility (RSF).
The Washington-based lender had previously confirmed a staff-level agreement (SLA) with Pakistan in March as part of a $7 billion program. If the board grants its approval, Pakistan will receive $1 billion, bringing the total disbursements under the EFF to $2 billion.
The KSE-100 had experienced one of its most significant single-day losses of the year on Wednesday, plummeting by 3,545.61 points or 3.09% to close at 111,326.57. That day’s high was 114,066.13, while the low reached 110,631.84 points.
