PSX projected to surge past 165,000 level by December 2025: report

The KSE-100 Index, the benchmark index of the Pakistan Stock Exchange (PSX), is anticipated to continue its upward trajectory in the calendar year 2025 (CY25), with a forecasted return of 55.5% (49% in USD terms), driven by falling interest rates and improved macroeconomic stability, according to a report by AKD Securities. 

The index is expected to reach 165,215 points by December 2025, marking a strong performance following significant gains over the last two years.

AKD Securities highlighted that the benchmark index of the PSX is set to post another year of strong returns, as interest rates are anticipated to fall to single digits in CY25 due to a strong external account. Falling returns from alternative investments are expected to make equities the preferred asset class in 2025. 

The focus on structural reforms and tight fiscal and monetary policies under the IMF program is also expected to improve the investment climate and support market rally.

The report noted that the KSE-100 Index outperformed its global peers in CY24, posting its highest return since 2002, with an approximately 70% gain in local currency terms and 72% in USD terms. Political stability, aggressive monetary easing by the State Bank of Pakistan, and a stable currency contributed to this performance. Globally, the KSE-100 ranked as the second-best performing market, trailing only Argentina.

AKD Securities attributed the CY24 rally to strong profitability in key sectors, particularly fertilizers, sustainable returns on equity (ROEs) in banks, and improved cash flows for exploration and production (E&P) companies and oil marketing companies (OMCs). Investor confidence, initially driven by foreign investors and insurance firms in the first half of CY24, was further boosted by mutual funds in the latter half of the year.

The report also provided a sectoral outlook for CY25, maintaining an overweight stance on banks, fertilizers, E&P, cement, OMCs, autos, textiles, and technology, as these sectors are expected to benefit from monetary easing and structural reforms. 

However, the brokerage firm recommended a market-weight position for the power sector due to changes in independent power producer (IPP) contracts and an underweight stance on chemicals due to subdued margins.

AKD Securities identified its top stock picks for CY25 as OGDC, PPL, MCB, MEBL, HBL, FFC, ENGRO, PSO, LUCK, FCCL, INDU, ILP, and SYS, citing strong fundamentals and growth potential across these companies.