Pakistan’s equity market rebounded strongly on Friday as investors bought the dip, encouraged by signs of de-escalation between the US and Iran. In addition, investors were motivated by a more dovish outlook for interest rates. Early gains lifted risk appetite across the board.
The benchmark KSE-100 Index at the Pakistan Stock Exchange surged to an intraday high of 184,645.65, up 3,189.32 points (1.76%) from the previous close of 181,456.33. Meanwhile, the index later touched an intraday low of 182,559.69, still higher by 1,103.36 points (0.61%).
“The market witnessed a sharp recovery after news flows suggested de-escalation between the US and Iran,” said Huzaifa Riaz, Director at Mayari Securities. He added that expectations of a 50-basis-point rate cut at the next policy meeting further improved risk-on sentiment.
Ahsan Mehanti, Managing Director and CEO of Arif Habib Commodities, echoed the view. He said bullish activity dominated the early session amid easing geopolitical risks and speculation over further policy easing, supported by falling government bond yields.
A Topline Research survey conducted ahead of the State Bank of Pakistan Monetary Policy Committee meeting scheduled for January 26, 2026, found that 80% of participants expect a rate cut. Among them, 56.4% anticipate 50 bps, 15.4% expect 100 bps, 5% look for 25 bps, and 3% foresee 75 bps. Meanwhile, 20% expect no change. In its previous decision on December 15, 2025, the SBP cut rates by 50 bps.
On the macro front, SBP foreign exchange reserves rose $16 million to $16.072 billion in the week ended January 9, taking total liquid reserves to $21.248 billion. Commercial banks’ reserves increased by $40 million to $5.177 billion. Furthermore, the central bank cited continued FX purchases amid a steadier current account, supported by remittances. From June 2024 to September 2025, net market purchases totalled $9.7 billion.
The SBP projects the FY26 current account deficit at 0–1% of GDP and expects reserves to reach $17.8 billion by June 2026. In addition, these projections are supported by planned official inflows.
The rebound followed a weaker session on Thursday. The KSE-100 fell 1,113.48 points (0.61%) to 181,456.34 after trading between 183,717.54 and 180,783.63.
