Karachi, March 7, 2025: The Pakistan Stock Exchange (PSX) continued its upward trend on Friday, driven by optimism surrounding a potential policy rate cut, progress in circular debt restructuring, and sustained investor confidence.
Investors showed strong buying interest, particularly in cement and energy stocks, ahead of the State Bank of Pakistan’s (SBP) upcoming monetary policy announcement on March 10. A decline in the Sensitive Price Index (SPI) further reinforced expectations of lower inflation in March, boosting sentiment.
The benchmark KSE-100 Index gained 685.52 points, or 0.6%, closing at 114,398.69. During the session, the index touched an intraday high of 114,721.58 and a low of 114,169.19.
According to Sana Tawfik, Head of Research at Arif Habib Limited, the market was driven by multiple factors. News of circular debt resolution led to gains in PSO and related stocks, while the cement sector performed well in anticipation of a policy rate cut. Additionally, the continuation of strong market momentum and the decline in the SPI index strengthened investor confidence.
Pakistan’s government plans to borrow Rs1.25 trillion from commercial banks to restructure old loans and settle circular debt. Bank executives met with government officials in Islamabad on Thursday to discuss the borrowing plan, which has also been shared with the International Monetary Fund (IMF). While discussions continue, some banks have raised concerns over the offered rate, reportedly set at KIBOR minus 1%, with an agreement expected soon.
Inflation data also supported market sentiment, as February’s inflation rate dropped sharply to 1.5% year-on-year—the lowest since September 2015, according to the Pakistan Bureau of Statistics (PBS). Month-on-month, inflation fell 0.9% in February after a 0.2% increase in January. The average inflation rate for July-February stood at 5.85%, a significant drop from 27.96% in the same period last year. These figures have reinforced expectations of monetary easing in the SBP’s upcoming policy decision.
On the external front, Pakistan’s central bank foreign exchange reserves increased by $27 million to $11.25 billion in the week ending February 28, as per SBP data. However, total liquid foreign reserves declined by $52 million to $15.874 billion due to a $79 million drop in commercial bank reserves. Despite the minor rise in SBP reserves, external debt repayments and a widening current account deficit remain critical risks.
The PSX had already seen a strong recovery on Thursday, with the KSE-100 Index surging by 1,459.42 points, or 1.3%, closing at 113,713.18. The highest point reached during the session was 113,871.22, while the lowest stood at 112,446.01.
