Pakistan stocks set for rally as rate cut hopes, IMF deal offset geopolitical risks

Pakistan’s equity market is expected to maintain its upward trajectory, driven by easing geopolitical tensions, potential interest rate cuts and an anticipated International Monetary Fund (IMF) loan approval, experts said.

Jibran Sarfraz, an equity expert, said the market’s upward movement hinges on de-escalation between Pakistan and India, interest rate decisions and the IMF announcement.

He explained that the market is fundamentally strong, citing an example where the index plunged more than 8,500 points during a tariff war but saw smaller losses during recent border tensions.

“Any interest rate cut of 50 to 100 basis points could trigger a new wave of buying,” Jibran said. The rally could strengthen further if the IMF approves a $1.1 billion loan for Pakistan, boosting the rupee and foreign exchange reserves.

He added that while tensions with India remain a concern, any softening in relations could push the market toward breaking its historic high of 120,000 points.

Salman Ahmad, Head of Retail Investors at Aba Ali Habib, said the market performed well on the last weekly trading day due to easing tensions between Pakistan and India.

“If no clashes occur at the border next week, the index could post fresh gains and close in positive territory,” he said.

He noted two key events next week: the monetary policy announcement and the IMF board meeting decision.

On monetary policy, Salman said opinions are divided—some expect the State Bank of Pakistan (SBP) to maintain rates due to border tensions, a three-year high trade deficit and potential IMF delays. Others predict a 50 to 100 basis point cut, as month-over-month inflation hit a multi-decade low, with the 10-month average at 4.8%.

A rate cut could spur a rally in leveraged sectors like cement, steel and textiles.

Regarding the IMF meeting, he said immediate fund approval would boost the market, while a delay until after the federal budget could lead to caution.

Auto, cement, banking and gas supply stocks have already performed well on strong earnings.

An AKD analyst said the market outlook remains positive, with expectations of a 100 basis point rate cut in Monday’s Monetary Policy Committee (MPC) meeting and IMF approval of the second tranche as key triggers.

“The likelihood of large-scale escalation between Pakistan and India remains low,” the analyst said, maintaining an “overweight” stance on banks, energy, fertilizer, cement, oil marketing companies, autos, textiles and technology.

An Arif Habib Ltd. analyst said investors will closely watch the May 5 MPC meeting, projecting a 50 basis point cut to 11.5%.

Saad Hanif, Head of Research at Ismail Iqbal Securities, said the market will stay positive as India-Pakistan tensions fade, but warned of concerns over a three-year high trade deficit.

“Exports underperformed due to strikes disrupting goods transport, but imports rose, indicating economic activity is picking up,” he said. Cement, steel and banking sectors posted strong earnings.

The KSE-100 Index fell 1,355 points (1.2%) week-over-week to close at 114,114 on May 2, 2025, amid geopolitical tensions.

Currency

Pakistan’s rupee remained under pressure during the outgoing week due to external payments pressure. Rupee shed 9 paisas during the week against the dollar to close at PKR 281.06 to a dollar.

Gold

Gold prices also eased in the international market as well as in the local market. Gold prices drop after trade talk hopes and strong US jobs data have pulled investors away from the safe-haven metal. In the local market, gold prices declined 1.2% during the week to PKR 344,500 per tola.