Market closes down by over 1700 points as bears drag down KSE-100 Index as selling pressure wipes out early gains

Bears returned to the trading floor of the Pakistan Stock Exchange (PSX) on Monday, erasing early gains and dragging the benchmark KSE-100 Index down by more than 1,700 points amid selling pressure. 

According to the PSX website, the market opened the week on a positive note, with the KSE-100 gaining over 1,500 points to reach 185,650.59 in early trading. However, the index failed to sustain the momentum with the market closing at a decrease of over 1700 points. 

Widespread selling was observed in key sectors, including cement, chemicals, mutual funds, commercial banks, oil and gas exploration companies, oil and gas marketing companies, and paper, board and packaging.

The index closed at 182,340.38 points, a decrease of 1,789.20 points or -0.97%, from the previous close of 184,129.58.

On the economic front, Pakistan recorded its first-ever fiscal surplus on a half-year basis during the first half of FY26, posting a surplus of Rs542 billion, or 0.4% of GDP, compared with a deficit of Rs1.5 trillion, or 1.3% of GDP, in the same period last year.

According to official data, the improvement came as total expenditures declined by 10% during July–December FY26, while total revenues increased by 9%. A key driver was a sharp reduction in interest expenses, which fell 31% year-on-year, largely due to a 33% decline in domestic debt servicing costs, even as expenses on external debt rose 1.6%.

The market remained largely positive for most of last week but reversed course in Friday’s session, shedding 3,703 points and erasing earlier gains. The KSE-100 closed at 184,130 points, down 45 points, or 0.02% on a week-on-week basis. This decline was driven by rising geopolitical tensions involving the US and Iran, along with adverse domestic security developments. 

Earlier in the week, sentiment had been supported by the prime minister’s industrial relief package, record monthly exports of $3.06 billion in January 2026 that led to a 7% year-on-year reduction in the trade deficit, and lower-than-expected inflation of 5.8% year-on-year for January. Additional support also came from the cement sector, where January 2026 offtakes reached a five-year high of 4.54 million tonnes, up 13% year-on-year, driven primarily by stronger seaborne exports.

Globally, Asian markets advanced on Monday as investors welcomed a decisive election victory for Japanese Prime Minister Sanae Takaichi, raising expectations of more reflationary policies. Sentiment was also supported by relief over a late rebound in US semiconductor stocks.

Gains in chipmakers and bargain buying in oversold momentum assets, including silver, helped lift risk appetite, alongside growing expectations of further interest rate cuts by the US Federal Reserve. Markets are increasingly pricing in a attachment rate cut by June, with upcoming data on jobs, inflation and consumer spending expected to strengthen the case for monetary easing.

Japan’s Nikkei index led regional gains, rising 4.4% to record highs as the government’s strong mandate bolstered expectations of higher spending and tax reductions. However, expectations of increased borrowing pushed two-year Japanese government bond yields to 1.3%, the highest level since 1996.

Elsewhere in the region, MSCI’s broad Asia-Pacific index excluding Japan gained 2.2%, while South Korea’s technology-heavy index climbed 4.3%.