Profit-taking halts PSX surge as investors lock in gains

The stock market experienced a decline on Tuesday as investors engaged in profit-taking, reversing some of the gains from the recent record-breaking rally. Earlier in the session, the market had surged past the 111,000-point milestone before broader market corrections took hold.

The Pakistan Stock Exchange's (PSX) benchmark KSE-100 Index dropped by 2,258.98 points, or 2.05%, reaching an intraday low of 108,608.58.

Despite this pullback, analysts remain optimistic about the market's long-term prospects, supported by solid macroeconomic fundamentals and favorable economic indicators.

“Key drivers include expectations of a rate cut, declining inflation, improved liquidity from institutional buying, and low bond yields, which make equities more attractive,” said Sana Tawfik, Head of Research at Arif Habib Limited.

The recent rally reflects improving confidence in Pakistan’s economic outlook, spurred by decreasing inflation, higher foreign reserves, and increased economic activity. Investors are encouraged by ongoing reforms and the possibility of further monetary easing, which could sustain market growth.

According to the State Bank of Pakistan (SBP), remittances reached $14.8 billion in the first five months of FY2025, a 33.6% year-on-year increase. November's inflows alone totaled $2.9 billion, a 29.1% rise from the same month last year, though slightly below October’s figures.

This surge in remittances is driven by a stable rupee, government incentives for formal remittance channels, and increased emigration. Over one million skilled professionals have left Pakistan in the past three years, boosting official inflows. Efforts to curb illicit currency trading and easing global inflation have also supported this trend.

Broader economic improvements continue to fuel market optimism. November's inflation rate fell to 4.9%, the lowest since April 2018, raising expectations for potential monetary easing. Saudi Arabia’s extension of a $3 billion deposit and formalized trade deals worth $560 million have further strengthened foreign reserves and investor confidence.

Economic activity remains robust, with petroleum sales in November reaching a 25-month high of 1.58 million tons. Additionally, the government’s Rs353 billion Ijarah Sukuk auction has added liquidity to the financial system.

“Consistent liquidity inflows from mutual funds and individual investors, driven by attractive returns and favorable tax policies, have also contributed,” noted Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company.

On Monday, the PSX continued its rally for the ninth consecutive session. The KSE-100 Index rose by 916.43 points, or 0.84%, closing at 109,970.38, after hitting an intraday high of 110,248.98.

All eyes are now on the State Bank of Pakistan’s monetary policy meeting scheduled for December 16. A potential rate cut could provide further momentum to the market.