The Pakistan Stock Exchange (PSX) surged nearly 900 points on Tuesday, driven by renewed investor confidence following the State Bank of Pakistan’s unexpected 100-basis-point interest rate cut to 11%. The rebound counters recent volatility fueled by India-Pakistan tensions over the Pahalgam attack.
At 10:03 AM on May 6, 2025, the KSE-100 index climbed 990.87 points, or 0.87%, to 115,093.10 from Monday’s close of 114,102.23, as reported by Bloomberg.
The State Bank’s decision to lower the interest rate, announced Monday, defied analyst predictions of caution due to ongoing geopolitical tensions with India.
The attack prompted India to allege “cross-border linkages” without evidence, a claim Pakistan rejected, calling for a neutral probe. Moody’s warned Monday that sustained tensions could hinder Pakistan’s growth and foreign funding, while India’s macroeconomic stability might face pressure from increased defence spending.
PSX’s Market Volatility and Recovery
The PSX had been volatile, with the KSE-100 dropping 1,036 points early Monday before recovering, led by the cement sector, as investors anticipated a rate cut. The interest rate reduction, defying expectations of no change amid India-Pakistan friction, restored confidence. However, analysts on X cautioned that the “low likelihood of full-scale war” due to nuclear deterrence supports market stability. Sectors like cement, banking, and oil and gas drove Tuesday’s gains, with Lucky Cement and Habib Bank among the top performers.
Read: State Bank of Pakistan Cuts Interest Rate to 11%
The PSX’s 900-point surge on May 6, 2025, fueled by a surprise interest rate cut to 11%, signals a robust market recovery amid India-Pakistan tensions over the Pahalgam attack. While Moody’s warns of economic risks, investor optimism prevails, driven by sectors poised for growth. The PSX’s resilience underscores Pakistan’s economic adaptability as geopolitical concerns linger.
