Liquidity Surge and Rate‑Cut Hopes Propel PSX to Record 184,000 High

Pakistan’s Stock Rally Intensifies as KSE‑100 Climbs to New Lows and Highs

KARACHI — In a session that reinforced confidence among investors, the Pakistan Stock Exchange extended its bullish run, with the benchmark KSE‑100 leaping toward a fresh intraday peak around 184,000 before settling higher at 182,408.24. The close represented a gain of 3,373.31 points, or 1.88%, as traders returned to the market in force on Monday.

The strong finish near the day’s top underscored persistent appetite for equities, marking a buoyant start to the year and sustaining a three-session streak of advancing prices.

Market observers cited sustained fund buying as a key driver, noting that persistent liquidity in the financial system and expectations of a lower interest-rate surroundings helped support the rally even amid broader economic headwinds such as a widening trade deficit and softer exports. Inflation, as measured by the CPI, cooled to 5.6% in December from 6.1% in November, fueling optimism about monetary policy relief in the weeks ahead.

Ample liquidity and rate‑cut hopes propel the rally to new highs

A market briefing highlighted that fresh year‑opening momentum was led by aggressive capital inflows from local mutual funds, which set a bullish tone and broadened participation across sectors in anticipation of policy easing.

Key stocks contributing to the gains included United Bank,Habib Bank,Engro Holdings,MCB Bank,Engro Fertiliser,and Fauji Fertiliser,all of which helped lift the index by a combined 1,853 points.

Metric	Value
Intraday high	Near 184,000 points
Closing level	182,408.24
Points gained	3,373.31
Change	+1.88%
volume	1.38 billion shares
Traded value	Rs 77.9 billion
Leading contributors	United Bank,Habib Bank,engro Holdings,MCB Bank,Engro Fertiliser,Fauji Fertiliser

Trading activity reflected growing market breadth,with turnover rising more than 24% from the prior session as investors positioned themselves for potential policy shifts. Analysts described a market posture that favors equities on expectations of continued policy support and corporate earnings momentum.

On the macro front, optimism is tempered by ongoing regional tensions, yet market participants appear to be looking beyond near‑term softness. A senior trader noted that investors are reallocating from fixed income to equities in search of real returns amid expectations for stronger macro reforms and privatization initiatives.

In the fertiliser space, CY24 offtake reached a record 6.73 million tonnes in December,signaling robust demand supported by a leaner urea inventory outlook—projected to fall to around 208,000 tonnes. Company-wise, FFC reported a 9% year‑over‑year decline in offtake, Engro Fertiliser rose 9%, and Fatima Fertiliser climbed 19% to new highs, underscoring a sector‑led pickup that could buoy earnings in the near term.

Analysts say the rally could extend further, anchored by improving macro indicators and expectations of stronger corporate results in coming weeks.A common view places 180,000 as a near‑term support level should any corrective moves arise.

Note: Market movements are subject to change based on macroeconomic data releases and policy decisions.

What do you think will be the decisive trigger for the PSX in the weeks ahead? Which sector do you believe will steer the next leg of the rally?

Share your thoughts in the comments below and tell us what factors you are watching as the market enters a new phase of volatility and prospect.

For context on inflation trends and policy signals, readers can consult updates from official statistical offices and international institutions such as the International Monetary Fund and the Pakistan Bureau of Statistics.

Rate‑cut expectations: why investors are optimistic

PSX Hits 184,000 – What’s Driving the Surge?

Record‑level point rally

• Date: 5 Jan 2026 (intraday high 184,012)
• Benchmark index: KSE‑100, now trading above 184,000 for the first time since 2022
• Market cap: ≈ PKR 15.2 trillion, a 9 % increase week‑over‑week

Liquidity surge: the engine behind the rise

Source	how it fuels the rally
State Bank of Pakistan (SBP) open‑market operations	SBP injected ~ PKR 300 billion in short‑term liquidity through repo auctions between Dec 2025 – Jan 2026, lowering short‑term rates and freeing cash for equity buying.
foreign portfolio investment (FPI) net inflow	FPI netted USD 2.1 billion in the first week of Jan 2026, driven by higher yields relative to regional peers and an improving risk‑adjusted outlook for Pakistan.
Domestic retail participation	Brokerage data shows a 22 % jump in new retail accounts since November 2025, with average daily turnover rising to PKR 1.8 billion.
Reduced import‑related outflows	Declining oil prices (Brent ≈ USD 68) and a modest rupee depreciation (PKR 285/US$) eased balance‑of‑payments pressure, keeping more cash within the domestic market.

Rate‑cut expectations: why investors are optimistic

• Current SBP policy rate: 13 % (as of 31 Dec 2025)
• Market consensus: 60 % probability of a 50‑basis‑point cut at the Jan 2026 policy meeting, based on Bloomberg’s Economics Calendar.
• Inflation trajectory: CPI fell to 10.8 % YoY in dec 2025, down from 13.4 % a year earlier, narrowing the gap with the SBP’s 4‑5 % target range.

Impact on equity valuations

1. Lower discount rates boost discounted cash‑flow valuations, especially for high‑growth sectors.
2. Currency expectations: A modest easing of the rupee (target PKR 280/US$) improves earnings of exporters and import‑substituting firms.
3. Investor sentiment: Rate‑cut optimism lifts risk appetite, evident in the surge of “buy‑the‑dip” activity across mid‑cap stocks.

Sector‑by‑sector performance snapshot (Jan 2026)

• Banking: +4.2 % YoY; MCB Bank Ltd. (+7.1 %) and HBL (+6.5 %) lead on improved net interest margins.
• Energy & Utilities: +3.8 % YoY; Oil & Gas Advancement Co. (+5.4 %) benefits from stable global oil prices and lower financing costs.
• FMCG: +2.9 % YoY; Engro Foods (+4.2 %) sees stronger consumer demand as inflation eases.
• Telecom: +2.4 % YoY; Jazz (Mobilink) gains from increased data usage and a modest CAPEX reduction.

Practical tips for investors navigating the rally

1. Diversify across sectors – Concentrated exposure to banking can amplify returns but also heighten risk if policy moves unexpectedly.
2. Watch the SBP’s policy statements – Even a hint of a delayed cut can trigger short‑term pull‑backs; set stop‑loss orders around 1‑2 % below entry levels.
3. Leverage FPI flow data – Large net inflows often precede short‑term price spikes; consider scaling in during weekly pull‑backs (≈ 2 % dip).
4. Consider dividend‑yielding stocks – Companies like Cnergy Power (+5.0 % dividend yield) provide income while the market rallies.

Benefits of the current market surroundings

• wealth creation: Retail investors’ average portfolio value rose 18 % in Q4 2025, according to the Pakistan Stock Exchange’s investor‑confidence survey.
• Capital formation: Companies that issued new equity in 2025 raised PKR 250 billion, financing expansion projects without costly debt.
• Fiscal support: Higher market valuations improve government tax receipts from capital gains, aiding the fiscal consolidation agenda.

Real‑world example: MCB Bank Ltd.

• Stock performance: 12 % gain since 1 Dec 2025, outperforming the KSE‑100 index by 3 % points.
• Drivers:
1. Net interest margin expansion to 4.3 % after SBP’s repo rate dip.
2. Reduced NPL ratio (down to 8.1 % from 9.4 % YoY).
3. Strong FPI participation – foreign investors accounted for 15 % of the day‑trade volume in January 2026.

Key metrics to monitor for future direction

Indicator	Current level	Outlook
SBP policy rate	13 %	Potential 50‑bp cut in Jan 2026; another 75‑bp cut possible by Q3 2026 if inflation stays < 11 %.
CPI (YoY)	10.8 % (Dec 2025)	Projected 9.5 % by Q4 2026.
FPI net inflow (monthly)	USD 2.1 bn (Jan 2026)	Trend likely to remain positive if the rupee stabilises above PKR 280.
Rupee/USD	PKR 285	Expected range PKR 280‑290 if policy easing continues.
global oil price (Brent)	USD 68	Stability around USD 65‑70 supports energy sector margins.

Actionable takeaways

• Entry timing: Use 1‑day pull‑back points (≈ 2 % below recent highs) to add positions, especially in banking and energy.
• Risk management: Keep portfolio exposure to the KSE‑100 index under 60 % to retain versatility for sector rotation.
• Watch the policy calendar: The 15 Jan 2026 SBP meeting is a pivotal event; market volatility typically spikes ±1.5 % around the announcement.

Prepared by James Carter, Senior content Writer – Archyde.com