The KSE-100 Index, Pakistan’s benchmark for stock market performance, is projected to reach 120,010 points by December 2025, according to Arif Habib Limited’s (AHL) latest “Pakistan Investment Strategy 2025” report.
This anticipated growth signifies a 27% return over the next 13 months, driven by stabilizing macroeconomic fundamentals and an undervalued equity market.
“The current market dynamics, coupled with easing interest rates and a stable exchange rate, present an ideal environment for equities to outperform,” the report states. AHL highlights that the KSE-100 trades at a P/E multiple of 5.3, substantially below its 10-year average of 8.3, signaling room for re-rating.
The report also notes that despite the strong 52% returns achieved in 2024, the KSE-100 remains undervalued across various valuation metrics. “Even with the CY24 returns, Pakistan’s market offers significant potential for growth,” AHL adds. Sectors such as technology and oil marketing companies are expected to lead earnings growth with projected increases of 39.3% and 39.1%, respectively, for FY25.
AHL underscores improving macroeconomic indicators, including GDP growth forecasted at 2.4% for FY25 and inflation expected to drop to 7.5%. These conditions, alongside declining interest rates and a manageable current account deficit, create favorable conditions for equities. “The stage is set for a potential market re-rating,” the report mentions.
However, challenges such as political instability, commodity price volatility, and macroeconomic imbalances during the IMF program are identified as key risks. The report also flags slower corporate earnings growth at 4.2% for 2025, the lowest since the pandemic year of 2020.
The AHL report highlights a shift in market ownership, with high-net-worth individuals, brokers, and companies now holding 76.4% of the KSE-100 free float. “With a 1% reallocation from fixed income to equities, mutual funds could deploy nearly Rs30 billion into the market,” it says, underlining domestic liquidity’s role in bolstering investor confidence.
In its conclusion, AHL maintains a positive outlook, citing easing monetary policy, stable PKR, and potential foreign direct investment as catalysts for sustained equity performance.
