The Pakistan Stock Exchange (PSX) closed the week on a positive note, with the benchmark KSE-100 index posting a modest gain of 0.4% on a week-on-week (WoW) basis.
Investor sentiment remained upbeat in the early part of the week as the federal budget for FY26 left capital gains and dividend tax rates unchanged, signalling moves towards fiscal consolidation without imposing a fresh burden on the equity market.
However, the momentum cooled towards the weekend amid geopolitical tensions triggered by Israeli strikes on Iran and the US imposing a 50% tariff on steel imports from key trading partners.
Key macroeconomic highlights shaping the market included a 1.8% year-on-year (YoY) uptick in March large-scale manufacturing (LSM) output, surge in May remittances to $3.7 billion – the second-highest monthly inflows on record, Rs853 billion T-bill auction where yields softened up to 25 basis points and 35% YoY jump in domestic car sales.
Trading activity also picked up, with average daily volumes rising 37% WoW and traded value climbing 33%. The KSE-100 hit an all-time high of 124,353 points during the week before profit-taking set in.
Analysts noted that the market welcomed the Rs17.3 trillion federal budget, which projected a revenue target of Rs19.3 trillion and a fiscal deficit of 3.9% of GDP, alongside tax relief for salaried individuals and incentives for the construction sector. Additionally, plans to secure $2 billion in commercial financing to bolster the State Bank's reserves further lifted investor confidence.
On a day-on-day basis, the PSX began the week with a record high close on Tuesday, though the benchmark KSE-100 index fluctuated within a narrow range amid uncertainty surrounding the budget announcement. The index recorded an increase of 384 points and settled at 122,024.
Bulls roared back to the market on Wednesday as investor appetite grew, which propelled the KSE-100 higher by 2,328 points to 124,353, fuelled by the announcement of federal budget, which maintained the status quo on equity taxes and signalled economic recovery.
However, the PSX experienced a turbulent session on Thursday, where the index hit a record intra-day high of 126,718 before reversing course to close modestly lower, reflecting both optimism fuelled by post-budget clarity and renewed pressure from geopolitical tensions. The KSE-100 lost 260 points.
The downturn continued on Friday, with the index plunging 1,950 points at 122,144 over rising geopolitical tensions following Israeli airstrikes on Iran.
Topline Securities, in its weekly review, wrote that the KSE-100 index gained 0.4% WoW. It started the week on a positive note where the budget increased investor optimism as the government kept capital gains and dividend tax rates unchanged and the overall theme of the budget was fiscal consolidation.
However, the market came under pressure by the end of the week on news of 50% tariff on steel by the US on its trading partners and an attack by Israel on Iran, which resulted in an increase in tensions in the Middle East, it said.
Other major developments during the outgoing week were LSM in March 2025 registering a YoY increase of 1.8%, remittances for May clocking in at $3.7 billion (up 16% month-on-month and 14% YoY), T-bill auction during the week raising Rs853 billion for the government against the target of Rs900 billion, where yields declined in the range of 1-25 basis points, and car sales for May reaching 14,762 units (up 35% YoY and 39% MoM).
Average daily traded volumes and value stood at 907 million shares (up 37% WoW) and Rs37 billion (up 33%), respectively, Topline added.
Syed Danyal Hussain of JS Global wrote that the PSX welcomed the FY26 budget as the government didn't announce any adverse steps for capital markets where capital gains tax measures were better than expected, encouraging mutual funds to divert funds towards equities.
The finance minister unveiled a Rs17.3 trillion budget for FY26, targeting revenues of Rs19.3 trillion (+15% YoY), fiscal deficit at 3.9% of GDP and a primary surplus of 2.4%.
The KSE-100 index hit an all-time high of 124,353 points during the week, reporting 2.2% gains in the first two sessions. However, the market underwent correction on Friday, led by escalating tensions between Israel and Iran. On a WoW basis, the index gained 0.4%, or 502 points, he added.
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