Karachi, May 31, 2025 – The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 index delivered a solid performance in May 2025, recording a 7.5% month-on-month increase, according to a report published by Topline Securities Limited. This significant surge reflects renewed investor confidence driven by supportive policy actions and international financial support.
The key catalyst behind the bullish momentum was the State Bank of Pakistan’s (SBP) decision to cut the policy rate by 100 basis points. The central bank’s move brought the policy rate down to 11%, a development that came in response to improving inflation expectations. The rate cut was interpreted by investors as a signal of policy easing, encouraging capital flows into equities and lifting overall market sentiment.
Investor morale was also significantly boosted by the International Monetary Fund’s (IMF) endorsement of Pakistan’s economic progress. The IMF not only approved the first review of the Extended Fund Facility (EFF) but also sanctioned a new Resilience and Sustainability Facility worth $1.4 billion. This international backing helped to address concerns over Pakistan’s external financing needs and added momentum to the stock market throughout the month.
Alongside these key developments, various economic indicators shaped the performance of the KSE-100 index in May. Inflation data showed a positive trend, with the Consumer Price Index (CPI) for April 2025 easing to 0.3%, down from 0.7% in March. This decline in inflationary pressure supported the central bank’s decision to lower the policy rate and reinforced the market’s positive outlook.
However, not all data points were favorable. Pakistan’s trade deficit widened sharply in April, reaching $3.39 billion, the largest monthly gap in three years and a 55% increase from the previous month. The widening deficit raised concerns about the country’s trade balance. Despite this, the current account managed to stay in surplus, reporting $12 million for April and bringing the fiscal year’s 10-month cumulative surplus to $1.88 billion. Strong remittance inflows played a crucial role in this, with total remittances rising 13% year-on-year to reach $3.2 billion in April.
The automotive sector presented a mixed picture. Car sales for April stood at 10,596 units, representing a 5% decline compared to March but a 1% increase from the same period last year. The month-on-month drop was primarily due to temporary supply chain disruptions caused by highway closures.
Trading activity on the PSX remained vibrant throughout May, with average daily volumes reaching 566 million shares and daily trading value standing at Rs28 billion. The robust participation from both local and foreign investors reflected growing optimism about Pakistan’s economic trajectory.
As May ends with the KSE-100 index closing on a strong note, market analysts are maintaining a cautiously optimistic outlook for the months ahead. Improved macroeconomic indicators, continued support from the IMF, and a more accommodative monetary policy stance are expected to support further gains, although external challenges and global economic conditions will continue to influence market dynamics.