Stocks likely to be volatile with focus on upcoming fiscal measures and tax reforms

Pakistan’s stock market posted mixed trends during the week ended May 23, 2025, reflecting cautious investor sentiment ahead of the upcoming federal budget.

Analysts expect the market to move sideways next week amid the rollover of May futures contracts, with focus shifting to budget-related announcements due the following week.

An analyst at Spectrum Securities said, “There is talk about some relief in super tax, reductions in import duties and sales tax on exempted sectors. However, major changes that could significantly shift sector outlooks are unlikely.”

The key focus will be on the fiscal deficit and the realism of growth targets for tax revenues. The government faces challenges on the fiscal side, with limited room to expand taxes or boost revenue growth. High direct and indirect tax rates, including an 18% sales tax, have hurt business competitiveness.

The government has signaled plans to bring additional exempted sectors under sales tax and raise rates for those with lower taxes.

The KSE-100 index is expected to find support near 118,000, with major support at 116,000 (30-day moving average). Resistance levels are seen at last week’s high, with an upper range near 122,000.

An analyst at AKD Securities said the market could remain positive in the coming weeks, with budget developments guiding short-term sentiment.

The KSE-100 is projected to reach 165,215 points by December 2025, driven by strong earnings in fertilizers, stable bank returns, and improving cash flows for energy firms amid falling interest rates.

Arif Habib Limited noted that investors will closely monitor budget proposals, which could spotlight certain stocks.

“The KSE-100 is currently trading at a PER of 6.4x (2025) compared to its 10-year average of 8.0x offering a dividend yield of ~8.4% compared to its 10-year average of ~6.5%.”

The KSE-100 closed the week at 119,103 points, down 0.46%. Foreign selling totaled $290,000, compared with $9.13 million the previous week.

Currency & Commodities

The Pakistani rupee weakened against the U.S. dollar, losing 30 paisas to close at 281.97 rupees, pressured by external payments and geopolitical uncertainty. Since Jan. 1, the rupee has depreciated 1.21%, and since July 1, 2024, it has fallen 1.29%.

Gold prices surged 4.43% to 351,000 rupees per tola, tracking a global rebound. The rally followed a short-term low on May 15 and may extend into next week before potentially reversing in June.