Karachi: The KSE-100 Index concluded the calendar year 2024 with an 84% annual return, marking the highest return in 22 years. The index closed above 115,000 points, bolstered by a 13.6% month-on-month return in December. December also saw the highest monthly turnover ever, with an average of 1,260 million shares traded. Despite this, foreign investors were net sellers for the fourth consecutive month, with a net outflow of $32 million, while mutual funds were net buyers, contributing a net inflow of $56 million.

According to JS Global, the re-rating of stocks continued as the central bank announced another 200 basis point cut in interest rates, with the government hinting at continued monetary easing and sub-5% CPI inflation figures for December 2024. The pharmaceutical and refinery sectors, particularly Pakistan Refinery Limited and Attock Refinery Limited, outperformed due to potential agreements under the new refinery policy expected in early January 2025.

In a related development, the government approved changes in banking sector taxes, abolishing an additional tax for banks not meeting the Advance-Deposit Ratio requirement and increasing the income tax rate on banks' earnings. The State Bank of Pakistan (SBP) furthered its monetary easing cycle with a fifth consecutive rate cut, reducing the policy rate to 13%. The SBP expects foreign exchange reserves to reach $13 billion by June 2025.

Consumer Price Index (CPI) figures are anticipated to remain below 5% for December 2024, following a 4.9% rate in November. The first half of fiscal year 2025 is projected to have an average CPI of 7.3%, significantly lower than the previous year's average. Stable macroeconomic conditions are expected to support further stock re-rating, with key picks including several banking and pharmaceutical stocks.