The capital market staged a strong comeback on Friday as investor sentiment rebounded on the back of hopes for de-escalating tensions between Pakistan and India, monetary easing, and the upcoming International Monetary Fund’s (IMF) board review.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index hit an intraday high of 114,250.59, reflecting a gain of 2,924.02 points, or 2.62%, from the previous close of 111,326.57. The session’s low was recorded at 112,820.07, still up by 1,493.5 points or 1.34%, marking a robust reversal from Wednesday’s steep fall of over 3%.
“Intervention from the US to encourage direct communication and cooperation with India is giving hope to the market that military confrontation can be avoided. Hence, this is a peace rally that may continue if tensions subside and both sides collaborate,” said AAH Soomro, an independent investment and economic analyst.
“Next week, we expect an interest rate cut and IMF board approval to continue the rally, assuming no political turmoil,” he added.
The diplomatic uptick followed US Secretary Marco Rubio urging both Islamabad and New Delhi, urging to work towards a “responsible resolution that maintains long-term peace and regional stability in South Asia.” US State Department spokesperson Tammy Bruce said that the US remains “in constant communication” with both governments.
The improved geopolitical outlook was further bolstered by investor expectations of monetary easing. The State Bank of Pakistan’s Monetary Policy Committee (MPC) is scheduled to meet on May 5, with analysts forecasting a 50 basis-point cut to bring the policy rate down to 11.5%.
“In its March monetary policy meeting, the SBP maintained a status quo stance, citing risks from volatile food and energy prices and external account pressures. However, it also acknowledged a continued decline in inflation and a sufficiently positive real interest rate on a forward-looking basis,” said brokerage firm Arif Habib Limited.
“Given the sustained disinflationary trend and ample real interest rate cushion, we believe there is still room for a measured rate cut to support economic recovery without undermining macroeconomic stability.”
In addition, attention is now fixed on the IMF Executive Board meeting scheduled for May 9. The board will review Pakistan’s $1.3 billion disbursement request under the Extended Fund Facility (EFF), as well as a request for performance criteria modifications and a new arrangement under the Resilience and Sustainability Facility (RSF).
The Washington-based lender had earlier confirmed a staff-level agreement (SLA) with Pakistan in March as part of a $7 billion programme. If the board grants approval, Pakistan will unlock $1 billion, bringing total disbursements to $2 billion under the EFF.
The KSE-100 had suffered one of its worst single-day losses of the year on Wednesday, plunging by 3,545.61 points or 3.09% to close at 111,326.57. That day’s high was 114,066.13, while the low hit 110,631.84 points.
