Karachi: The Pakistan Stock Exchange (PSX) surged to unprecedented levels this week as the government unveiled a budget favorable to equity markets. The KSE-100 Index soared to an all-time high of 124,353 points, buoyed by better-than-expected measures related to capital gains tax, which prompted mutual funds to pivot towards equities. In the first two sessions of the week, the index gained 2.2%, although escalating tensions between Israel and Iran triggered a market correction on Friday. On a week-on-week basis, the KSE-100 recorded a modest increase of 0.4%, translating to a gain of 502 points.

The trading volume also saw a significant boost, with the average daily trading volume increasing by 41% compared to the previous week. This comes in the wake of the Finance Minister's announcement of a Rs17.3 trillion budget for the fiscal year 2026, with ambitious revenue targets set at Rs19.3 trillion, marking a 15% year-on-year increase. The budget outlines a fiscal deficit target of 3.9% of GDP and a primary surplus of 2.4%.

Tax revenue is projected to reach Rs14.1 trillion, up 19% from the previous year, with the Public Sector Development Program allocated Rs1 trillion, representing a 29% increase. The government also introduced tax relief measures for the salaried class by reducing rates for the first three income slabs and proposed initiatives to stimulate construction activities.

In addition to budgetary measures, other positive developments included government plans to raise $2 billion through commercial bank financing, aiming to bolster the State Bank of Pakistan's foreign exchange reserves to $14 billion by June 2025. Moreover, remittances reached the second-highest monthly level of $3.7 billion in May 2025, bringing the 11-month total for the fiscal year to approximately $35 billion, a 29% increase year-on-year.