Karachi: The KSE-100 Index, a key benchmark for the Pakistan Stock Exchange, reached an unprecedented high of 125,627 points at the close of June 2025, marking a significant 59% return for the fiscal year. This achievement underscores the index's resilience amid global geopolitical tensions and places it as the second-highest annual gain in over two decades.
The fiscal year concluded with a notable response from equity markets following the announcement of the FY26 Budget. Government decisions to maintain tax rates on capital gains and dividends while raising taxes on institutional and corporate fixed income investments played a role in steadying the market. The month of June, however, was characterized by global market volatility due to the Iran-Israel-US conflict, which initially led to a 7% dip in the KSE-100. The subsequent ceasefire helped the index recover, closing with an 8% rebound by month's end.
In parallel, geopolitical tensions impacted oil prices, with Brent crude reaching a five-month high of $79 per barrel. The State Bank of Pakistan (SBP), facing potential inflationary pressures, chose to maintain its policy rate at 11% during a mid-June meeting, despite the challenging economic environment.
The National Assembly approved the FY26 Budget, with a total outlay of Rs17.6 trillion, aiming for enhanced revenue and a controlled fiscal deficit. The budget includes tax relief for the lower income brackets and increased focus on mortgage financing and subsidies for affordable housing, signaling potential growth in the construction sector.
Despite these optimistic developments, the SBP's foreign exchange reserves saw a significant drop, primarily due to debt repayments, though expectations of rollovers offer some hope for recovery.
Looking forward, market analysts maintain a positive outlook on Pakistan equities, emphasizing sectors driven by domestic demand. The stabilization of inflation and recovery in consumer purchasing power are expected to bolster market performance, with particular interest in companies such as OGDC, FFC, and DGKC.