Pakistan Stock Exchange Benchmark Falls 3,560 Points in October Amid Geopolitical Uncertainty

Market participation remained robust, with 1.066 billion shares changing hands for a combined value of Rs49 billion. KEL topped the volume charts, accounting for 195.8 million shares.

The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 index fell 2.1%, or 3,560 points, during October to close at 166,409. Geopolitical uncertainty, foreign portfolio outflows, and profit-taking in heavyweight stocks weighed on investor sentiment. The market staged a four-day recovery late in the week, gaining more than 4,800 points to reclaim the 167,000 level on Thursday, before profit-taking pushed the index back below that threshold on Friday.

Trading began the final week of October with a volatile session. Nevertheless, the KSE-100 index gained 664 points (+0.41%) to close at 163,039, reclaiming the 163,000 level. On Tuesday, a balance between monetary policy caution and diplomatic optimism helped the bourse surge 1,429 points (+0.88%), crossing the 164,000 mark to close at 164,467.

On Wednesday, the index extended its advance, rising 1,269 points (+0.77%) to close at 165,736. The positive momentum continued Thursday as the benchmark added 1,457 points (+0.88%) to reach 167,193, surpassing the 167,000 level. However, profit-taking dragged the index below 167,000 on Friday following the four-day rally, with the benchmark falling 784 points (-0.47%) to settle at 166,409.

Arif Habib Limited (AHL) reported that the KSE-100 index dropped 3,560 points (-2.1%) in October 2026 to close at 166,409. Persistent geopolitical tensions kept investor sentiment subdued, while oil price fluctuations contributed to cautious trading. Additionally, the State Bank raised the policy rate by 50 basis points to 12% during its Monetary Policy Committee (MPC) meeting on October 26, citing higher energy prices and geopolitical uncertainty affecting the domestic inflation outlook.

AHL also noted that Pakistan and the International Monetary Fund reached a staff-level agreement on the fourth Extended Fund Facility (EFF) and third Resilience and Sustainability Facility (RSF) reviews. The agreement paves the way for disbursements of $1 billion and $210 million, respectively, subject to executive board approval. This would bring total disbursements under both programmes to $5.7 billion.

During the month, the committee reviewing Pakistan’s Automotive and Auto Parts Manufacturing Policy 2026–31 proposed reforms aimed at boosting exports, accelerating New Energy Vehicle (NEV) adoption, and enhancing competition. Key measures include lower sales tax on NEVs, reduced import tariffs, mandatory export targets for manufacturers, localisation requirements, and incentives for incremental exports.

Treasury bill cut-off yields increased in October 2026, largely tracking the State Bank’s 50-basis-point rate hike. The one-month yield rose from 11.68% to 12.11%, the three-month from 11.99% to 12.43%, the six-month from 12.45% to 12.65%, and the 12-month from 12.49% to 12.89%. Separately, the central bank doubled the minimum capital requirement for banks to Rs20 billion, to be met by December 2030, with statutory reserves now eligible.

Power generation increased 5% year-on-year to 13,217 gigawatt hours (GWh) in September 2026, driven by higher hydel, local coal, imported coal, and wind output. Generation costs soared 32% year-on-year to Rs9.35 per kilowatt-hour due to a larger share of re-gasified liquefied natural gas, high-speed diesel, and furnace oil, alongside elevated crude prices. This prompted distribution companies to seek a positive fuel cost adjustment of Rs2.56/kWh.

Gross Roshan Digital Account (RDA) inflows reached $14.2 billion as of September 2026. Of this amount, $2.1 billion was repatriated and $8.9 billion utilised locally, leaving a net liability of $3.1 billion. Meanwhile, KSE-100 index profitability—based on 96% of index weight—rose 26% year-on-year in the first nine months of CY2026, reaching Rs1,638 billion. Average trading volumes at the PSX fell 21.8% month-on-month to 471.9 million shares in October 2026, while average traded value dipped 20.2% to $70.1 million, according to AHL. Topline Securities stated that the KSE-100 index declined 2.09% month-on-month during October 2026, driven by geopolitical uncertainty, foreign portfolio outflows, profit-taking in heavyweight stocks, and cautious investor sentiment against a backdrop of global financial market volatility and domestic macroeconomic concerns.

Major developments during the month included a moderation in Pakistan’s CPI inflation to 10.26% in September 2026, compared with 11.15% in August 2026, though it remained above the 5.76% recorded in September 2025. Automobile sales declined 12% year-on-year and 3% month-on-month to 15,104 units, according to the auto manufacturers association. Average daily traded volumes and value during the month stood at 600 million shares (up 27% month-on-month) and Rs23 billion (up 19% month-on-month), respectively, Topline added.

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