IMF deal ignites PSX rally, KSE-100 Index settles above 81,000 mark for the first time

The Pakistan Stock Exchange (PSX) saw a vibrant start to Monday’s trading, as its benchmark Index closed above the 81,000 mark for the first time in its history. 

This rise was influenced by investor optimism following the recent staff-level agreement between Pakistan and the International Monetary Fund (IMF).

The benchmark index touched the day’s highest level of 81,428.43 points, up by 1484.34 points as the market saw broad-based buying across various sectors and most stocks traded in the green zone. 

At the day’s close, the KSE-100 settled at 81,155.60 points, with an increase of 1211.51 points or 1.52% compared to the previous close of 79,944.09 points. 

Market sentiment has been buoyant since the recent budget announcement, which did not introduce new taxes on capital markets. This sentiment was further enhanced over the weekend when the IMF confirmed a new 37-month, $7-billion bailout package for Pakistan on Friday night. This loan agreement is anticipated to boost Pakistan’s struggling economy, which secured a $3-billion loan under the Stand-By Arrangement last year.

Last week, the market remained volatile due to uncertainty surrounding the Supreme Court’s verdict on reserved seats. Consequently, the benchmark KSE-100 Index closed with a loss of 269 points or 0.33% WoW, closing at 79,944 points on Friday. However, despite the verdict announced on Friday being in the favor of the opposition party, the market managed to hold its ground. 

In negotiations with the IMF, the lender demanded the abolition of the Sovereign Wealth Fund (PSWF) along with the implementation of a 45% tax on agricultural income. Additionally, the Prime Minister’s announcement of a PkR 50 billion subsidy for residential power consumers (up to 200 units category) has yet to elicit a response from the IMF. 

AKD Research said in its note on Friday that the market is expected to maintain a positive outlook, despite the potential for a short-term lackluster impact from recent political developments. The rally overall is anticipated to persist due to the market’s attractive valuations, with the forward P/E continuing to remain below 4.0x. Meanwhile, market participants’ focus would remain on upcoming inflation figures and the next MPC meeting.