Karachi: The KSE-100 Index experienced a robust increase of 3.6% month-on-month, closing at 180,000 points, marking a year-to-date return of 3.6% in the calendar year 2026. This growth comes as the index rebounded by 21% from its March 2026 low, aided by a 60-day ceasefire agreement between the United States and Iran and renewed diplomatic negotiations.
According to JS Global, Asian equity markets recorded their most substantial quarterly performance in over two decades, largely driven by a revival in the technology sector and declining oil prices. This surge in performance raised hopes for a lasting resolution to ongoing conflicts. The Pakistan Stock Exchange (PSX) saw a broad-based recovery, led by the Transport, Textile Composite, and Sugar sectors, which benefited from reduced fuel price pressures and tax relief measures introduced in the budget. Individual stocks such as ILP, GAL, KOHC, and CHCC emerged as top performers, showing significant gains throughout the month.
The decline in global energy prices was notable, with Brent crude oil prices decreasing by 20% month-on-month and 38% from their March 2026 peak to $73 per barrel. This was attributed to easing geopolitical tensions following the signing of the Islamabad Memorandum of Understanding and the reopening of shipping routes through the Strait of Hormuz. As a result, domestic petrol prices fell by 22% month-on-month and 35% from their April 2026 peak.
The State Bank of Pakistan's Monetary Policy Committee decided to maintain the policy rate at 11.5% during its June 2026 meeting. The committee noted that inflationary pressures were primarily due to higher global oil prices, rather than excess domestic demand. The completion of the International Monetary Fund's reviews has strengthened the central bank's foreign exchange reserves, which are expected to exceed $18 billion by the end of fiscal year 2026.
The PSX reacted favorably to the fiscal year 2027 budget, which avoided measures that could have negatively impacted capital markets. Highlights included a reduction in income tax for salaried individuals, a cut in super tax for corporates, the elimination of super tax for exporters meeting specific revenue criteria, and a three-year extension of the Final Tax Regime for the IT sector. The budget continues to focus on generating revenue, with a target of Rs20.6 trillion, driven by an increase in the tax collection target to Rs15.3 trillion.
Looking forward, optimism remains as macroeconomic fundamentals improve. The expectation of continued softer oil prices is anticipated to alleviate pressure on the external account, reduce inflation, and support domestic demand.