Moaaz Manzoor

The Pakistan Stock Exchange (PSX) navigated a volatile October, closing the month on a cautious note as data reflected resilience in key economic indicators despite market corrections and geopolitical headwinds. The benchmark KSE-100 Index settled at 161,632 points, marking a month-on-month (MoM) decline of 3,862 points or 2.3 percent in rupee terms and 2.2 percent in dollar terms.

The bearish tone stemmed largely from institutional selling and fund outflows triggered by geopolitical tensions and below-par corporate results. However, a sharp 4,899-point rally on the final trading day helped limit the losses. During the month, the State Bank of Pakistan (SBP) maintained the policy rate at 11 percent, while foreign exchange reserves rose by USD 71 million to USD 14.47 billion.

Pakistan’s current account recorded a surplus of USD 110 million in September 2025 compared with a deficit of USD 325 million earlier, reflecting improved external balances. Remittances climbed 11 percent year-on-year (YoY) to USD 3.18 billion, and cumulative inflows during the first quarter of FY26 rose 8 percent to USD 9.6 billion.

Trade figures, however, remained under pressure. According to the Pakistan Bureau of Statistics, exports stood at USD 2.5 billion, down 11.7 percent YoY, while imports rose 14 percent to USD 5.8 billion, widening the quarterly trade deficit to USD 9.4 billion — up 32.9 percent from a year earlier. Meanwhile, GDP growth for FY25 stood at 3.04 percent, and central government debt eased 1 percent MoM to PKR 77.5 trillion. Sectoral activity on the exchange showed a mixed performance.

The Banking, Fertilizer, and Technology sectors contributed positively to the index, while Exploration & Production, Cement, and Power weighed it down. Trading volumes rose 7 percent MoM to 1.43 billion shares, though traded value declined 4.1 percent to USD 187 million. Foreign investors remained net sellers with USD 25.3 million outflows, mainly from Fertilizers, E&Ps, and Banks, while local buying was led by Banks, Individuals, and Companies.

On the macroeconomic front, inflation stood at 5.6 percent YoY in September and is expected to remain around the same level in October, significantly lower than the 7.2 percent recorded in October 2024. The IMF’s Staff-Level Agreement on the USD 7 billion Extended Fund Facility and USD 1.3 billion Resilience and Sustainability Facility is expected to unlock nearly USD 1.2 billion in combined inflows upon Executive Board approval — likely to boost investor confidence in the coming months.

Arif Habib Limited noted that the KSE-100 Index is trading at a price-to-earnings ratio of 7.9x for 2025, below its 15-year average of 8.6x, offering a dividend yield of around 6.2 percent. The brokerage expects inflation to average 4.6 percent in the first four months of FY26, compared to 8.7 percent in the same period last year.

Muhammad Bilal Ejaz, Research Analyst at Ismail Iqbal Securities, told Wealth Pakistan that the PSX “remained volatile amid border tensions, closing the week down 1 percent at 161,632 points despite a sharp rebound on ceasefire news.” He added that the market’s strong 3.1 percent (around 4,900 points) recovery on the final day helped limit monthly losses.

Syed Zafar Abbas, Manager at Zahid Latif Khan Securities, described October as “a volatile month in the stock market,” adding that uncertainty led to selling pressure, though the market “took a good trend after a 14,000-point downward correction,” ending the month with a “very good rally, especially in the banking sector.”

Overall, despite geopolitical unease and foreign outflows, improving remittances, fiscal discipline, and the IMF agreement indicate a steadier macroeconomic outlook that could support sentiment in November.

Credit: INP-WealthPk