Pakistan stock market could hit $100B market cap in 2026: report

Pakistan’s stock market is expected to reach a historic market capitalization of $100 billion for the first time in nine years, driven by macroeconomic stability, political continuity, and sustained economic reforms, according to a new report by AKD Securities.

The brokerage house projects the benchmark KSE-100 Index will post a robust return of 53% in 2026, lifting the market to the $100 billion mark amid easing monetary conditions supported by an improving external account position.

AKD Securities forecasts the KSE-100 Index to climb to 263,800 points by December, underpinned by higher and more sustainable returns on equity in the banking sector, improved profitability and cash flows in exploration and production (E&P) companies and oil marketing companies (OMCs), and strong earnings in the fertilizer sector.

“The market’s positive momentum is expected to continue in CY26 as sustained reforms, an improving external account position and political stability create room for further monetary easing,” AKD Securities said.

Macro stability to fuel equity gains

According to the report, subdued returns on alternative asset classes and a relatively stronger currency are likely to make equities the preferred investment choice in 2026. The projected 53% return translates into a 48.4% gain in U.S. dollar terms, positioning the KSE-100 Index to achieve a $100 billion market capitalization milestone.

AKD Securities also highlighted improving relations with the United States and Gulf Cooperation Council countries as a potential catalyst for renewed foreign and regional investment into Pakistan.

The firm noted that the likelihood of continuity in the current political setup strengthens the case for equities to trade at valuation multiples seen during previous periods of stability. Despite delivering a cumulative return of 188.6% over the past three years, Pakistan’s equity market is still trading at a 40.7% discount to regional peers, while offering an attractive dividend yield of 6.2% for 2026.

Record performance and liquidity in 2025

The KSE-100 Index outperformed regional peers in 2025, supported by a strong external account position maintained through a disciplined policy approach under the International Monetary Fund program, AKD Securities said.

Pakistan’s re-emergence on the global stage following its recent clash with a neighboring country also contributed to improved investor sentiment. Confidence initially led by the corporate sector and individual investors was later reinforced by mutual funds in the second half of the year.

As a result, the KSE-100 posted positive returns for the third consecutive year, rising 49.7% in 2025 to date, or 49.4% in dollar terms, alongside record-high market liquidity.

Policy rate seen falling to single digits

AKD Securities expects the State Bank of Pakistan to continue easing monetary policy as inflation trends toward the lower end of the central bank’s target range after June.

A strong external account, robust remittance inflows and improved access to external commercial financing—supported by recent credit rating upgrades from S&P and Moody’s—are likely to allow higher imports as economic activity accelerates.

However, the report cautioned that the central bank is expected to maintain positive real interest rates of 4% to 5% to avoid a repeat of boom-and-bust economic cycles.

Foreign inflows

The brokerage also expects foreign investor interest to return to Pakistani equities, supported by macroeconomic stability, reform momentum and currency stability, alongside a declining global interest rate environment.

AKD Securities said Pakistan is likely to gain entry into the MSCI Emerging Markets Index, with three KSE-100 stocks expected to meet eligibility criteria, while two others may narrowly miss the threshold.

If an upgrade does not materialize, the firm noted, Pakistan’s weight in the MSCI Frontier Markets Index would increase significantly.

Overall, AKD Securities said the outlook for Pakistan’s equity market remains constructive, with macro stability and reforms setting the stage for a landmark recovery after nearly a decade.