PSX among worst-performing markets globally, KSE-100 drops 15% in Q1 2026

Pakistan’s equity market ranked among the worst-performing global markets in the first quarter of 2026, with the benchmark KSE-100 Index declining by around 15 percent amid sustained selling pressure and external uncertainties.

The downturn placed the Pakistan Stock Exchange alongside markets in India and Indonesia that also recorded weak performance during the period.

Losses intensified in March, when the KSE-100 Index dropped by 19,319 points or 11.5 percent month-on-month to close at 148,743 points. The index opened the month at 152,717 points, reached a high of 161,475 points, and later fell to a low of 144,119 points, reflecting volatility.

The correction followed three consecutive years of strong gains, with investors adjusting positions and reassessing valuations amid rising risks.

Trading activity declined sharply during the month. Average daily volumes fell to around 487 million shares, down 37 percent from February, while average traded value dropped nearly 30 percent to about $99 million, indicating reduced participation.

According to IMS Research, market participation also weakened on a broader measure, with average traded value (including futures) declining by around 32 percent month-on-month to approximately $130 million, reflecting a pullback in risk appetite.

Foreign investors remained net sellers, with IMS Research estimating net outflows of about $72 million, particularly in banking and cement stocks. Local banks and individual investors provided partial support, with cumulative inflows of around $95 million.

Market sentiment remained under pressure due to geopolitical developments, particularly the escalation of the US-Iran conflict and disruptions in regional energy supply chains, including the Strait of Hormuz. These developments pushed global oil prices higher, raising concerns over inflation, interest rates, and external and fiscal balances.

Additional domestic factors, including border tensions with Afghanistan, elevated secondary market yields, and uncertainty around key projects such as Reko Diq, further weighed on investor sentiment despite progress on external financing arrangements.

Despite some supportive macroeconomic indicators, including a current account surplus in February and a stable monetary policy stance, investor caution persisted, leading to broad-based declines across sectors. Reduced trading activity during Ramadan also contributed to lower participation.

The sharp rise in global crude prices, with benchmarks such as Arab Light and Oman/Dubai crude averaging above $100 per barrel during the month and peaking near $135, added to concerns over inflation and potential policy tightening. Delayed domestic fuel price adjustments also raised risks of fiscal pressures.

Analysts said market direction in the coming months is likely to remain sensitive to global oil prices, macroeconomic data, and developments related to the IMF programme. Expectations of fuel price pass-through and higher inflation could influence monetary policy and investor behaviour.

While valuations have adjusted following the correction, analysts noted that uncertainty linked to geopolitical developments may continue to limit near-term upside, with selective sectors expected to remain in focus.