Karachi: The KSE-100 Index ended its five-month streak of monthly gains, recording a 2.3% drop amid geopolitical tensions and profit-taking by major investors. The decline was attributed to border tensions with Afghanistan, which overshadowed positive corporate earnings and an IMF agreement. The market showed signs of recovery after a ceasefire, despite a net selling of $104 million. Key gainers included HUBC, PSO, HBL, and LUCK, with trading volumes increasing 7% over the month.

Oil prices hit a five-month low, closing at $61 per barrel due to increased output by OPEC and record U.S. production levels. The Pakistani rupee appreciated slightly, reaching a six-month high at 280.91 per dollar, which could potentially ease import bill pressures and inflation.

Pakistan secured a staff-level agreement with the IMF for the second review under the Extended Fund Facility, anticipating a $1.2 billion disbursement by December 2025. The IMF commended Pakistan for its commitment to fiscal and energy reforms and maintaining a tight monetary stance.

The State Bank of Pakistan kept its policy rate steady at 11%, addressing expected food inflation and a potential current account deficit increase. It projected a current account deficit within 0-1% of GDP for FY26 and anticipated foreign exchange reserves to reach $17.8 billion by the end of FY26.

Looking ahead, market focus will shift to IMF disbursement and currency strength as potential catalysts, with the MSCI review and MPC meeting expected to pass without significant impact. The energy sector outlook may improve with efforts to reduce circular debt and potential gas price revisions in early 2026. Long-term prospects remain positive for sectors like Cement, Pharma, and IT, with specific companies highlighted as top picks.