KSE-100 Surges 43.5% in FY26, Defying Geopolitical Headwinds

By Moaaz Manzoor

Pakistan’s equity market brushed aside geopolitical strain, rising oil costs and monetary policy uncertainty to post one of its strongest fiscal‑year showings in recent memory, with the benchmark KSE‑100 index climbing 54,674 points—or 43.5%—to finish FY2025‑26 at 180,302.

Arif Habib Limited (AHL) reported that the benchmark delivered a 43.5% return in rupee terms and 46.4% in dollar terms for FY26, buoyed by stronger corporate earnings, heightened investor activity and a gradually stabilising macro‑environment. The bulk of the advance occurred in the first half, when profitability rose 3.3% and the index posted a 38.5% gain. Momentum eased in the latter half amid US‑Iran tensions and higher global oil prices, yet the market still tacked on an additional 3.6% to close the year at a record level.

June proved pivotal in pushing the index past the 180,000‑point threshold. Topline Securities noted a 3.6% rise in the KSE‑100 during the month, as investor sentiment lifted after the United States and Iran reached a cease‑fire and peace accord. The de‑escalation eased worries about regional instability and oil‑price swings, prompting investors to boost their equity allocations.

The upbeat mood aligned with several encouraging economic signs. In May, Pakistan’s trade deficit narrowed to $2.58 billion, workers’ remittances rose to $4.3 billion and the current account swung to a $459 million surplus after a deficit the prior month. Although inflation crept up to 11.66% from 10.89% in April, market participants largely regarded the overall macro‑environment as favourable for stocks, according to Topline Securities.

The advance was broad‑based, not confined to a few outliers. Automobile parts led the pack with a 278% surge, trailed by woollen textiles, fertilizers, synthetics and tobacco. On the downside, cable and electrical goods, food products and vanaspati were among the few sectors that closed the year in the red.

At the stock level, Bank of Punjab topped the list with a 278% gain, followed by Pakistan Telecommunication Company, JVDC, Askari Bank and Pakistan International Bulk Terminal. Conversely, SS Oil Mills suffered the steepest loss, ahead of IBFL, TPLRF1, PGLC, Sui Southern Gas Company and BNWM.

Robust investor participation characterised the year. Technology shares recorded the highest average trading volumes, followed by power, banking, investment banking and food names. FNEL, K‑Electric, WorldCall Telecom, Bank of Punjab and Cnergyico were the volume leaders, whereas banks led in turnover value, ahead of exploration and production firms, cement, technology and oil‑marketing companies. Pakistan Petroleum Limited, National Bank of Pakistan, Oil and Gas Development Company, Pakistan State Oil and Bank of Punjab featured among the most actively traded stocks by value.

Despite the rally, foreign investors were net sellers throughout FY26, withdrawing $851 million, primarily from cement, food and banking counters. Domestic institutional players, however, kept supplying liquidity. In June, mutual funds turned net buyers of equities to the tune of $46 million, while insurance firms and retail investors remained net sellers, per Topline Securities.

Ali Najib, Deputy Head of Trading at Arif Habib Limited, characterised FY26 as a landmark year for the Pakistan Stock Exchange.

“The rally stemmed from ample liquidity, attractive valuations across key sectors and resilient investor sentiment, even amid intermittent geopolitical turbulence,” he said.

Looking forward, Najib noted that lower global oil prices and rising expectations of interest‑rate cuts could lend further support to equities. Nonetheless, inflation, the State Bank’s policy stance and geopolitical developments will remain the chief drivers of market performance in the months ahead.

AHL also anticipates the positive momentum to extend into FY27, underpinned by projected earnings growth of 10‑11%, improving liquidity and a stable macro‑environment, while warning that external geopolitical risks could still sway investor sentiment.

Credit: INP-WealthPk

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