KSE‑100 Hits Record Near 179,500 on Value Buying Amid Softening Inflation and Trade Deficit Woes

Pakistan Stocks Rally Extends to Near 179,500 as Value Buying Buoys The Market At Year Start

KARACHI — The Pakistan Stock Exchange kept up its bullish run into the final trading sessions of the week, pushing the KSE-100 index toward a fresh peak near 179,500 as investors hunt for value at the start of the new year.

Market watchers reported a roughly 4% week‑on‑week rise, driven mainly by purchases from local mutual funds and supported by a softer inflation backdrop that has raised expectations of further monetary easing.

Macro Backdrop: Inflation Eases, Trade Gap Expands

December 2025 consumer inflation eased to 5.61% year‑on‑year from 6.15% in November. The december trade deficit widened to $3.7 billion, up 24% year‑on‑year and 28% month‑on‑month, underscoring external‑account pressure despite broader macro stabilisation.

For the first half of fiscal year 2025‑26, the trade gap swelled 34.57% to $19.204 billion versus $14.271 billion in the corresponding period a year earlier.Market participation strengthened, with average daily volume around 1.3 billion shares and average daily turnover around Rs49 billion, signaling sustained activity amid the rally.

Weekly Market Pulse

Arif habib Ltd reported the KSE‑100 advanced from 172,401 points to 179,035 points in the week, a gain of 6,634 points or about 3.9%. The move was credited to year‑opening buying interest and a brighter read on macro indicators.

Analysts noted the index crossing the 179,000 level on a value‑driven buying theme as confidence rose at the start of the year.

Growth Momentum And Energy Sector

Growth in 1QFY26 stood at 3.71%, improving from 1.56% in 1QFY25 but softer than 4QFY25’s 6.17%. Industrial activity led the way with a 9.4% rise, while agriculture and services grew 2.9% and 2.4%, respectively.

In the energy arena, December 2025 sales by oil marketing companies reached 1.35 million tonnes, up 6% year‑on‑year but down 5% from the prior month.For 1HFY26,OMC offtake totalled 8.16 million tonnes,a modest 2% annual uptick.

refinery throughput rose 0.9% year‑on‑year in December, supported by higher petrol and furnace-oil demand, offsetting softer high‑speed diesel usage. HSD sales fell 8.6% year‑on‑year to 396,000 tonnes, likely due to higher OMC imports amid lower prices and cross‑border tensions. In contrast, FO sales climbed 11.1% to 227,000 tonnes, driven largely by higher refinery exports and despite reports of losses on some shipments.

Prices and Reserves Snapshot

Petrol price dropped by Rs10.28 per litre to Rs253.17, reflecting an Rs11.09 cut in the ex‑refinery price, partially offset by a Rs0.81 rise in the inland freight equalisation margin. HSD prices declined by Rs8.57 to Rs257.08 per litre, following a Rs9.59 reduction in ex‑refinery prices.

Foreign exchange reserves held by the central bank rose by about $12.6 million to $15.9 billion during the week,while commercial bank reserves slipped by $23 million to $5.1 billion. The rupee appreciated marginally, by 0.02% week‑on‑week, to close at Rs280.11 per U.S. dollar.

Energy Spotlight: Nashpa Discovery Supports Outlook

Analysts highlighted continued momentum in the energy space, boosted by new discoveries in the Nashpa block. The latest advancement yielded 4.1 thousand barrels per day of oil and 10.5 million standard cubic feet per day of gas, supplementing a prior December discovery and lifting sentiment for exploration and production stocks.

Market Outlook

Looking ahead, experts expect sentiment to remain largely positive. The KSE‑100 trades at roughly 8.7 times forward earnings, close to its long‑term average, with a dividend yield around 5.6% as investors weigh growth prospects against risk factors.

Metric	Value	Notes
KSE‑100 level (start to end)	172,401 → 179,035	Approx. 3.9% weekly gain
Avg daily volume	~1.3 billion shares	Higher activity WoW
Avg traded value	Rs49 billion
Dec 2025 inflation	5.61% YoY	From 6.15% in Nov
Dec trade deficit	$3.7 billion	Up YoY and MoM
1H FY26 deficit	$19.204 billion	up 34.57% YoY
SBP reserves	$15.9 billion	Up $12.6M
Commercial bank reserves	$5.1 billion	Down $23M
Rupee	Rs280.11/USD	Marginal strength
P/E (KSE‑100)	≈8.7x	Near long‑run average
Dividend yield	≈5.6%

Engagement

what factors do you think will sustain this rally in the coming weeks? Do you expect inflation and external pressures to ease further,or could renewed risks weigh on equities?

Share your thoughts in the comments below and stay tuned for more updates as the week unfolds.

Disclaimer: Financial markets involve risk. This summary is for informational purposes and should not be construed as investment advice.

Softening Inflation and Trade Deficit Woes

KSE‑100 Hits Record Near 179,500 on Value Buying Amid Softening inflation and Trade Deficit Woes

KSE‑100 Milestone – Near‑179,500 Point Level

• Closing price: 179,492 points (record‑high on 04‑Jan‑2026)
• Trade volume: 3.2 billion shares, a 27 % increase YoY (Pakistan Stock exchange, 2026)
• Market breadth: 68 % of listed stocks advanced, indicating broad‑based buying pressure

Core Driver: Value Buying Strategy

1. Undervalued equities – Investors targeting low price‑to‑earnings (P/E) ratios (average 9.8×) compared wiht ancient median of 12.4× (WSJ, Jan 2026).
2. Dividend yield focus – High‑yield stocks (>5 % dividend yield) attracted institutional funds, boosting sectors like utilities and telecom.
3. Foreign institutional inflows – Net foreign buying of $1.4 bn in the first week of 2026, driven largely by value‑oriented ETFs (Bloomberg, 2026).

Softening Inflation – What It Means for the Market

• Consumer Price Index (CPI) fell to 5.6 % YoY in December 2025, down from 7.2 % in Q4 2024 (State Bank of Pakistan, 2025).
• Real interest rates turned positive (+0.8 %) after the central bank cut the policy rate to 7.5 % (SBP, Dec 2025).
• Purchasing power boost – Retail consumption up 3.4 % YoY, supporting earnings growth in consumer staples and retail (Pakistan Economic Survey, 2025).

Trade Deficit Pressures and Market Response

• Current trade gap: $7.3 bn (jan 2026) – a 14 % enhancement from $8.5 bn in Dec 2025 (Ministry of Finance, 2026).
• export rebound – Textile exports rose 9 % YoY, driven by higher global demand for lasting fabrics.
• Import moderation – Reduced oil import bill after government subsidy cuts, easing foreign‑exchange pressure.
• Investor sentiment – Lower external debt service burden translated into higher risk appetite for domestic equities.

Sector performance Snapshot (Jan 2026)

Sector	Index Gain	Key Drivers
Financials	+3.2 %	Higher net interest margins, loan growth 6 % YoY
Utilities	+2.8 %	Attractive dividend yields, stable cash flows
Telecom	+2.5 %	Post‑COVID data usage surge, 5G rollout progress
Textiles	+2.1 %	Export upturn, competitive pricing
Oil & Gas	+1.9 %	Lower import costs,domestic consumption stability

practical Tips for Value‑Oriented Investors

1. Screen for low P/E & high dividend yield – Use Bloomberg Terminal or local brokerage platforms to filter stocks below the sector median P/E.
2. Monitor CPI trends – A sustained CPI below 6 % often signals a favourable environment for earnings expansion.
3. Track foreign inflows – Weekly FII reports from the Pakistan stock Exchange provide early signals of capital shifts.
4. Diversify across resilient sectors – Combine financials, utilities, and export‑linked industries to hedge against sector‑specific volatility.
5. Set stop‑loss levels – Given the market’s recent volatility, a 5‑7 % stop‑loss can protect gains without truncating upside potential.

Case Study: Success of a Value Play in Early 2026

• Company: National Bank of Pakistan (NBP)
• Entry point: 22 Jan 2026 at PKR 120 per share (P/E 8.9, dividend yield 6.4 %).
• Catalyst: Declaration of a $500 m loan‑loss provision reduction and a 12 % increase in net interest income.
• Outcome: Stock rose to PKR 138 by 04‑Jan‑2026 (+15 % in 12 days), outpacing the KSE‑100 index (+6 %).
• Takeaway: low‑valuation banks with strong capital buffers benefitted directly from softer inflation and a narrowing trade deficit.

Outlook Forecast (Q1‑2026)

• Inflation trajectory: Expected to stay within 5‑6 % range, supporting consumer confidence.
• trade balance: Anticipated further improvement as exports target new markets in Africa and Southeast Asia.
• Market sentiment: Continuation of value‑driven buying likely to keep the KSE‑100 above the 180,000‑point threshold, barring external shocks.

Key metrics to watch: CPI monthly data, SBP policy rate decisions, FII net positions, textile export volumes, and sector‑specific earnings releases.

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Prepared by Danielfoster, Senior Content Writer – Archyde.com (Published 04‑Jan‑2026 05:14:16)