The Pakistan Stock Exchange (PSX) has recorded its highest daily traded value in almost two decades, with ready-market turnover reaching approximately Rs85 billion. The surge in trading activity reflects growing investor confidence and heightened participation, underscoring the strengthening momentum in Pakistan’s equity market at the start of 2026.
Equity returns have remained robust since the beginning of the year, with the market posting a gain of 6.3% in the first four trading sessions of 2026. This performance has reinforced expectations of a sustained rally, particularly as alternative investment avenues continue to lose their appeal. In contrast to equities, fixed-income investments have seen a sharp decline in returns over the past 18 months. Yields that stood above 24% in mid-2024 have now fallen to nearly 9–10%, significantly reducing the attractiveness of bonds and other fixed-income instruments.
Market participants attribute the sharp rise in turnover largely to aggressive buying by local mutual funds. With yields on fixed-income products continuing to decline, fund managers have increasingly shifted allocations toward equities in search of higher returns. This reallocation has played a central role in boosting daily traded volumes and supporting price appreciation across key sectors.
Analysts point out that the broader macroeconomic environment has become more supportive of equity investments. Falling interest rates, ample liquidity in the financial system, and improving risk appetite have collectively tilted investor preference toward stocks. Institutional participation has also increased, lending further depth and stability to the market. Rising valuations reflect expectations of earnings growth and improved economic conditions, particularly as monetary easing feeds into corporate profitability.
Despite the strong performance of the equity market, attracting sustained foreign investment has remained a challenge. Data released by the State Bank of Pakistan shows that foreign investors withdrew $393 million from the equity market during the first half of FY26. During the same period, inflows amounted to $142 million, resulting in net outflows of $251 million. The continued foreign selling highlights lingering concerns around global risk sentiment and emerging market exposure, even as local investors remain optimistic.
Looking ahead, market outlooks remain upbeat. AKD Research expects the positive momentum in the KSE-100 Index to continue throughout 2026. The brokerage forecasts a return of 53% for the year, projecting the index to reach 263,800 points by December 2026. If realized, this would take Pakistan’s equity market capitalization to a historic level of $100 billion.
The combination of declining interest rates, strong local participation, and improving sentiment has positioned equities as the preferred asset class for investors. With liquidity conditions remaining favorable and earnings expectations improving, market participants believe the PSX could continue to attract increased domestic capital, even as foreign flows remain cautious.
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