Karachi, May 10, 2025 – The Pakistan Stock Exchange (PSX) witnessed significant losses during the week ending May 9, with the benchmark KSE-100 index falling by a notable 7.2%. The primary driver behind this sharp decline was the mounting geopolitical tensions between Pakistan and India, which have had a profound impact on market sentiment. Investor confidence was rattled throughout the week, leading to widespread sell-offs and heightened volatility.
Analysts at Topline Securities Limited identified the escalating situation along the Pakistan-India border as the central factor behind the KSE-100’s weekly slump. The tensions, exacerbated by reports of cross-border hostilities and growing diplomatic strain between the two nations, left investors wary and cautious. The atmosphere of uncertainty prompted significant selling pressure, particularly from individual investors and mutual funds, who were responding to redemption demands due to fears over the unfolding geopolitical crisis.
Despite the considerable sell-off, local institutional investors, including banks, insurance companies, and large corporate entities, helped cushion the market’s decline. Their involvement prevented the KSE-100 index from falling further, absorbing much of the selling activity. However, despite these efforts, the overall sentiment in the market remained bearish, with investors closely monitoring the situation along the Pakistan-India border.
In addition to the geopolitical concerns, several key economic developments also played a role in shaping market sentiment. The government held a fixed-rate Pakistan Investment Bonds (PIB) auction, raising Rs299 billion in both competitive and non-competitive bids, falling short of the target of Rs350 billion. Nonetheless, a positive sign came from the auction results, with cut-off yields declining by 15–20 basis points. This slight decrease suggested that there was some optimism within the fixed income market despite the prevailing uncertainty.
On the external front, Pakistan saw some positive economic indicators. Foreign exchange reserves held by the State Bank of Pakistan (SBP) rose by $118 million, reaching a total of $10.33 billion as of May 2, 2025. Additionally, remittance inflows for March showed a healthy 13% year-on-year growth, totaling $3.2 billion. These figures helped provide some support for Pakistan’s economic outlook, particularly in terms of its current account stability.
However, despite these relatively positive economic developments, the ongoing tensions with India overshadowed the market’s outlook. The KSE-100 index remained under pressure, reflecting how sensitive the market has become to regional geopolitical events. The rising geopolitical risks created an environment where investor confidence remained fragile, making it challenging for the market to recover in the short term.
Trading activity throughout the week remained strong in volume but leaned negative in tone. The average daily traded volume reached 508 million shares, while the average daily traded value stood at PKR 27.6 billion. While trading activity was high, the negative sentiment continued to dominate, with investors opting for caution amidst the uncertainty.
Looking ahead, market analysts have warned that unless the situation between Pakistan and India de-escalates in the coming days, the KSE-100 may continue to experience increased volatility. The sensitivity of the stock market to geopolitical developments suggests that further fluctuations in the index are likely until investor confidence is restored. As such, investors may need to adopt a wait-and-see approach until a clearer resolution to the geopolitical crisis emerges.
In conclusion, the week of May 9 has been marked by a significant downturn in the KSE-100 index, driven primarily by the ongoing tensions between Pakistan and India. While there are positive signs in the broader economic landscape, the political and military instability has continued to overshadow market performance. As the situation unfolds, the outlook for the PSX remains uncertain, and further volatility in the coming weeks cannot be ruled out.