This remarkable surge is in stark contrast to the downturn seen in global markets, which are grappling with fears of a recession, inflationary pressures, and rising interest rates.
Pakistan’s market outperforms
As other global markets show signs of weakness, Pakistan’s stock market continues to soar. On Monday, the KSE-100 index hit a high of 84,656.90, gaining over 1,000 points during the day. This rally comes as major international indices, such as those in Asia and Europe, face volatility.
Even in the US, stronger-than-expected labour data has reduced the likelihood of significant interest rate cuts by the US Federal Reserve, further dampening global market sentiment.
Yet, Pakistan’s market remains on a bullish trajectory. Strong performances in key sectors, including oil, gas, banking, and cement, have driven the rally. The oil and gas sector, in particular, has been a key contributor, with stocks like Oil and Gas Development Company (OGDC), Pakistan Petroleum Ltd (PPL), and Pakistan State Oil (PSO) seeing significant gains.
What’s driving the rally?
Several factors explain Pakistan’s stock market surge. Improved macroeconomic conditions, particularly a reduction in inflation and stabilising monetary indicators, have played a central role. Investors are anticipating a substantial policy rate cut, which could further boost market performance.
“The market is expecting a rate cut of 150 to 200 basis points in the coming weeks, which has generated strong buying momentum,” said Sana Tawfik, Head of Research at Arif Habib Limited told Business Recorder.
Additionally, falling yields in the fixed-income market have led investors to seek higher returns in equities. This shift has been particularly noticeable in index-heavy sectors, such as banks and energy, which have shown robust growth. Recent energy tariff adjustments have improved cash flows for energy sector companies, further attracting investor interest.
“Falling yields have spurred increased interest in the stock market, as lower fixed-income returns have driven investors to seek higher yields in equities,” Yousuf M Farooq, director of research at Chase Securities told Dawn.
Moreover, he pointed out that “a quarter-on-quarter decline in receivables” for companies such as Pakistan Petroleum Limited (PPL) and Pakistan State Oil (PSO) attracted attention to the oil and gas sector.
Strong local investor interest
Strong local investor confidence, combined with institutional support, has fueled the rally. Last week, the KSE-100 index gained over 2,200 points, crossing the 83,000 level for the first time in history. The positive sentiment has continued this week, despite security concerns such as Sunday’s terrorist attack in Karachi, which targeted Chinese workers.
Awais Ashraf, director of research at AKD Securities, explained that the rally is being driven by “a substantial decline in fixed-income yields and the positive impact of energy tariff rationalisation on energy stocks,” Dawn reported.
As the corporate earnings season kicks off next week, experts believe that the rally is likely to continue, with Pakistan’s stock market capitalising on local optimism and sectoral strength, even as global markets remain subdued.
Indian markets bleed red
In India, the equity benchmarks BSE Sensex and NSE Nifty experienced their longest losing streak in a year, closing lower for the sixth consecutive session on Monday, October 7.
The Sensex declined by 638 points, finishing at 81,050, while the Nifty dropped 219 points to settle at 24,798. This broader market downturn has resulted in a staggering loss of ₹22 lakh crore in investors’ wealth over just three sessions, bringing the total market capitalisation of BSE-listed companies to its lowest level in two months.
Last week, investors on Dalal Street faced a significant setback, with losses exceeding ₹17 lakh crore, marking the Nifty 50’s worst week since June 2022.