Pakistan’s stock market extended its decline during the outgoing week, with the benchmark KSE-100 Index shedding 4,045 points as escalating geopolitical tensions, rising oil prices and persistent selling pressure weighed on investor sentiment.
The index closed at 162,375 points on Friday, down 2.4% week-on-week. Average daily trading volume declined 13.4% to 496 million shares, reflecting reduced investor participation amid heightened uncertainty.
Geopolitical Tensions and Rising Oil Prices Weigh on Stocks
The market remained volatile amid continued Houthi attacks on Saudi Arabia and reports that the United States was considering an attack on Iran following the midterm elections.
Brent crude prices climbed 6.4% during the week, reaching $114.90 per barrel on Friday. The increase intensified concerns about inflation, Pakistan’s external account and the potential implications for monetary policy.
Higher international oil prices can increase Pakistan’s import bill and place additional pressure on economic stability, adding to uncertainty for investors.
Pakistan’s Economic Outlook Presents a Mixed Picture
Pakistan’s economic indicators provided a mixed assessment of the country’s growth prospects. The World Bank projected economic growth of 3.8% for fiscal year 2027, while inflation was expected to rise to 8.2%, compared with 7.1% in the current fiscal year.
The government revised its FY26 growth estimate to 3.65%, slightly below the provisional estimate of 3.7% but above the 3.1% growth recorded in FY25.
Meanwhile, the State Bank of Pakistan’s foreign exchange reserves increased by $19 million to $21.49 billion as of October 16, offering a modest improvement in the country’s external reserve position.
Banking Deposits and Industrial Indicators Show Growth
Banking sector deposits increased 16% year-on-year to Rs40.8 trillion at the end of September 2026, reflecting continued growth in deposits across the financial system.
Consumer auto financing also rose 33.6% to Rs407 billion in the first half of September, marking its 22nd consecutive monthly increase.
In the agriculture sector, urea offtake surged 42% year-on-year to 611,000 tonnes in September, supported by inventory building ahead of the Rabi season. However, DAP offtake declined 30% to 68,000 tonnes amid higher domestic prices.
Power generation increased 6% year-on-year in the first quarter of FY27, indicating a recovery in electricity consumption. Cotton arrivals also rose 8% to 4.1 million bales as of October 15.
Fiscal Measures and Energy-Sector Liabilities Remain in Focus
During the week, the finance minister sought Fitch Ratings’ assessment of Pakistan’s prospects for moving into the BB rating category. The government also approved a draft automobile policy for 2026–31, while the weekly Sensitive Price Indicator increased 0.65% week-on-week.
The privatisation process advanced with the prequalification of 10 bidders for the sale of electricity distribution companies.
However, financial pressures in the energy sector persisted. Power-sector circular debt reached Rs1.7 trillion, while gas-sector liabilities stood at Rs3.6 trillion as of June 30, 2026.
These liabilities remain a concern for the broader economy and could continue to influence investor assessments of fiscal risks and the outlook for energy-sector reforms.
Foreign Investors and Mutual Funds Lead Net Selling
Foreign investors and mutual funds were the largest net sellers during the week, recording net sales of $5.7 million and $10.2 million, respectively.
Individual investors provided some support to the market, leading net buying with purchases of $14 million.
The contrasting flows reflected a cautious market environment in which local individual investors bought shares while institutional and foreign participants reduced their exposure.
Market Capitalisation Declines Across Major Indices
Pakistan’s market capitalisation fell to Rs18.01 trillion, equivalent to $65.07 billion, from Rs18.48 trillion, or $66.73 billion, a week earlier.
The decline extended across major market indices:
- The KSE-30 Index fell 3% to 47,823 points.
- The KMI-30 Index dropped 3% to 232,734 points.
- The All-Share Index declined 2.2% to 98,620 points.
Modaraba, sugar and leasing companies were among the few sectors to post gains. Refinery, technology and communication, and woollen sectors recorded some of the steepest declines.
Among individual stocks, THCCL, UPFL, PSEL, TPLR1 and BWCL were the leading gainers. PTC, PGCL, AHCL, ATRL and KAPCO ranked among the worst performers.
KSE-100 Outlook Hinges on Monetary Policy and Regional Developments
The near-term direction of the Pakistan stock market is likely to depend on geopolitical developments, international oil prices and the upcoming Monetary Policy Committee meeting.
Expectations that the central bank will maintain the policy rate could provide some stability. A reduction in Middle East tensions and a retreat in oil prices may also help improve investor sentiment.
Despite the recent correction, analysts see potential support from improving economic indicators and relatively attractive valuations. Stocks highlighted for investors include OGDC, PPL, UBL, MEBL, HBL, FFC, ENGROH, PSO, LUCK, FCCL, INDU, ILP and SYS.
Investors will continue to monitor external risks, monetary policy decisions and corporate-sector developments to assess whether the market can stabilise after its latest weekly decline.