Stock expected to rally as budget & IMF boost fuel optimism

Pakistan’s stock market rallied 11.6% during the week ended May 16, driven by easing geopolitical tensions. Investors are now closely monitoring forthcoming budget proposals ahead of the federal budget announcement, with certain stocks expected to gain traction.

An analyst at AKD Securities said the market is likely to remain positive in the coming weeks, buoyed by a ceasefire agreement and a US$1 billion tranche disbursement from the International Monetary Fund.

The benchmark KSE-100 Index is expected to maintain its upward trajectory, targeting 165,215 points by December 2025.

The rally is primarily supported by strong earnings in the fertilizer sector, sustained return on equity in banking, and improving cash flows for exploration and production companies, as well as oil marketing firms—all benefiting from falling interest rates and economic stability.

Jibran Sarfraz, an equity analyst, said the market is likely to reach a new high next week, driven by federal budget expectations that could boost investment and improve economic documentation.

He noted that several budget-related proposals are emerging daily, with both positive and negative developments circulating.

A key expectation is a potential reduction in corporate tax rates, along with possible relief for the salaried class.

“Overall, it appears that despite challenges in meeting the tax collection target set by the IMF, the government is on track to achieve it, which would help fulfill one of the key conditions necessary to qualify for the next tranche,” Sarfraz said.

Another critical development is the potential resolution of the circular debt issue, while easing tensions between Pakistan and India have provided investors with a sense of stability.

An analyst from Arif Habib said that market participants are expected to closely monitor forthcoming budgetary proposals ahead of the federal budget announcement, whereby certain scrips could come under limelight.An analyst at Spectrum Securities noted the stock market’s swift rebound reflects optimism that war will be averted, as global powers intervene to prevent military conflict between the two nuclear-armed neighbors.

While both countries remain committed to the ceasefire, no progress has been made toward negotiations. The ongoing uncertainty leaves the region vulnerable to future tensions.

Investor focus has now shifted to the upcoming budget announcement in the first week of June. The government has signaled plans to lower or streamline import duties, with discussions also hinting at the possible abolishment of the super tax.

However, the administration aims to boost total tax collections by roughly 25% in the next fiscal year. Given Pakistan’s participation in the IMF program, analysts see little likelihood of substantial tax relief, including the elimination of the super tax.

The stock market is trading near record highs, with technical indicators pointing to an upside target of 128,000 after breaking above 120,000. However, uncertainty surrounding budget measures may limit gains, likely leading to a sideways market trend until there is greater clarity on taxation policies.

Currency & Commodities

The Pakistani rupee remained flat against the U.S. dollar, gaining five paisas to close at PKR 281.71, amid eased external payment pressures and geopolitical uncertainty. Foreign exchange reserves saw a slight uptick. Since January 1, the rupee has depreciated by 1.11%.

Gold prices fell 4.22% to PKR 336,100 per tola, following a decline in international markets as investors shifted funds into bonds and the U.S. dollar, which have been performing well. Analysts note that after gold’s recent record highs, some investors are now selling to lock in profits.