The Pakistan Stock Exchange (PSX) opened on a positive note on Tuesday as investor sentiment received a significant boost following the State Bank of Pakistan’s (SBP) unexpected decision to cut the policy rate by 100 basis points. The benchmark KSE-100 Index surged by nearly 700 points during intraday trading, reflecting market optimism driven by the monetary policy shift.
By 1:05pm, the KSE-100 Index stood at 114,787.14, marking an increase of 684.91 points or 0.6% from the previous close. The gains were broad-based, with strong buying activity observed across key sectors, including automobile assemblers, cement, commercial banks, oil and gas exploration companies, oil marketing companies (OMCs), power generation, and refineries.
Major contributors to the rally included index-heavyweights such as Hub Power Company (HUBCO), National Refinery Limited (NRL), Pakistan State Oil (PSO), Mari Petroleum (MARI), Oil and Gas Development Company (OGDC), Pakistan Petroleum Limited (PPL), Pakistan Oilfields Limited (POL), MCB Bank, United Bank Limited (UBL), and National Bank of Pakistan (NBP), all of which were trading in the green.
The momentum was sparked by the SBP’s Monetary Policy Committee (MPC) decision on Monday to reduce the key policy rate from 12% to 11%, a full 100 basis point cut. The move exceeded market expectations, as most analysts had forecast a more modest reduction of 50 basis points.
“This cut is higher than market expectations,” noted Mohammed Sohail, CEO of Topline Securities. “It sends a strong signal that the central bank is prioritizing economic recovery and liquidity support amid moderating inflation and improved external accounts.”
The market had closed flat on Monday at 114,102.24 points, recovering from a steep 1,000-point drop earlier in the day, as investors awaited the outcome of the MPC meeting. The positive surprise in the rate decision appears to have triggered renewed buying interest on Tuesday.
While local equities benefited from the domestic monetary easing, global markets remained cautious. Asian stock markets traded in narrow ranges as investors weighed the potential impact of renewed trade tensions between the United States and its trading partners. The dollar regained ground against several Asian currencies, reflecting risk-averse sentiment fueled by tariff concerns.
Oil prices remained under pressure amid pledges from major producers to increase supply, keeping crude near four-year lows. Meanwhile, currency markets in Asia attracted attention following the recent surge in the Taiwan dollar, which has sparked speculation about a broader realignment of regional foreign exchange strategies in response to U.S. trade pressures.
In Hong Kong, the de facto central bank was active in markets, purchasing $7.8 billion to prevent the local currency from appreciating and breaking its peg to the U.S. dollar, underscoring heightened volatility in global financial systems.
Back home, the PSX’s positive reaction to the SBP’s policy rate cut reflects investor confidence in the central bank’s direction and sets the tone for a potentially bullish trend in the short term. Analysts believe that sustained inflows and policy stability could further support market momentum, particularly in rate-sensitive sectors such as banking, cement, and construction.
The move also signals a broader shift in macroeconomic policy, with stakeholders increasingly optimistic about easing inflation, stabilizing currency trends, and gradual economic recovery.