Pakistan’s equity market could regain momentum as improving economic indicators and expectations surrounding corporate earnings offer potential support, although geopolitical uncertainty and elevated international oil prices continue to weigh on investor sentiment. Separate research reports by Arif Habib Limited and AKD Securities identify the State Bank of Pakistan’s Monetary Policy Committee meeting scheduled for October 26 as a key event for market direction. Analysts widely expect the central bank to maintain the existing policy rate, while developments in the Middle East could influence oil prices, inflation expectations and the outlook for future monetary easing. The assessment comes after a volatile week at the Pakistan Stock Exchange (PSX), during which selling pressure across several major sectors pushed the benchmark KSE-100 Index lower.
The KSE-100 Index declined by 4,045 points, or 2.4% week-on-week, to close at 162,375 during the week ended October 24, 2026. The KSE-All Share Index also lost 2.2% to settle at 98,620 points. On a year-to-date basis, the two indices were down 6.7% and 5.7%, respectively. Continued geopolitical tensions, including reports of Houthi attacks on Saudi Arabia and concerns about a possible United States strike on Iran following the midterm elections, contributed to market uncertainty. Brent crude prices climbed 6.4% during the week to $114.90 per barrel, raising concerns about the potential impact of higher energy costs on Pakistan’s economy and inflation outlook.
Banking stocks exerted the largest downward pressure on the benchmark index, accounting for a decline of 925 points. Technology stocks contributed a further 512-point reduction, followed by investment banks with 507 points, cement companies with 459 points and power companies with 266 points. Among individual companies, ENGROH was the largest negative contributor, reducing the index by 489 points, while Systems Limited (SYS), Lucky Cement (LUCK), ATRL and HUBC also weighed on performance. In contrast, PSEL, THCCL, UPFL, BWCL and Nestlé Pakistan made positive contributions. Sector performance remained uneven, with refineries falling 10.1%, technology and communication declining 7.7% and woollen companies losing 7.3%. Modarabas recorded a gain of 5.2%, while sugar and allied industries advanced 1.5%.
Trading activity also reflected a cautious market environment. Average weekly trading volumes declined 12.6% to 393 million shares, while average traded value increased 7.3% to $69.7 million. Another brokerage estimate placed average daily trading volumes at 496 million shares, down 13.4% week-on-week. Mutual funds recorded net selling of $10.2 million, while foreign investors sold shares worth $5.7 million on a net basis. Individual investors provided some support, emerging as the largest net buyers with purchases of $14 million. The selling pressure from institutional investors and lower trading activity indicate that market participants remained cautious ahead of the monetary policy announcement and amid uncertainty over regional developments.
Economic indicators presented a mixed picture. Pakistan’s estimated economic growth for fiscal year 2025-26 was revised down to 3.65% from the provisional 3.70%, while growth for FY2024-25 was revised to 3.11% from 3.18%. The economy expanded by 3.89% in the first quarter of FY2025-26, 4.31% in the second and 4.42% in the third, before slowing to 2% in the fourth quarter. Agriculture recorded growth of 3.50%, industry expanded 3.34% and services grew 3.81%. The economy reached an estimated size of Rs126.4 trillion, equivalent to $450.4 billion, with per capita income at $1,896. Meanwhile, the World Bank projected growth of 3.8% for FY2026-27 and inflation of 8.2%, compared with 7.1% inflation in FY2025-26.
Pakistan’s external account indicators also remained important for investors assessing the economic outlook. Total liquid foreign exchange reserves fell by $30.3 million week-on-week to $26.83 billion as of October 16, 2026. The State Bank of Pakistan’s reserves increased by $19.1 million to $21.49 billion, while commercial banks’ reserves declined by $49.4 million to $5.34 billion. The country’s import cover stood at 3.01 months. The Pakistani rupee appreciated marginally by 0.03% against the US dollar, closing at Rs276.82. These indicators provide important context for the central bank’s upcoming decision, particularly as international oil prices could influence import costs, domestic inflation and the country’s external financing requirements.
Developments in the energy market added another dimension to the economic outlook. Electricity generation increased 5% year-on-year to 13,217 gigawatt-hours in September 2026, supported by higher output from hydropower, local coal, imported coal and wind sources. However, the average cost of electricity generation increased 32% to Rs9.35 per kilowatt-hour, partly because of a greater contribution from regasified liquefied natural gas, high-speed diesel and furnace oil, alongside elevated international oil prices. Electricity distribution companies consequently sought a positive fuel charges adjustment of Rs2.56 per kilowatt-hour for September. Power generation during the first quarter of FY2026-27 rose 6% year-on-year, reflecting a recovery in electricity consumption.
Domestic petroleum prices moved lower during the week despite the rise in international crude prices. Motor spirit declined 3.2%, or approximately Rs12.50 per litre, to Rs377.71, while high-speed diesel fell 1.3%, or around Rs5.20 per litre, to Rs391.75. The reductions followed lower ex-refinery prices, while petroleum levies and margins remained unchanged. In agriculture, cotton arrivals reached 4.081 million bales by October 15, up 8% year-on-year. Arrivals in Sindh increased 7% to 2.443 million bales, while Punjab recorded a rise of 8% to 1.638 million bales. Cotton sowing covered 1.79 million hectares, equivalent to 82.8% of the target of 2.16 million hectares. The government has set a production target of 9.64 million bales for FY2026-27, compared with 7.05 million bales in the previous fiscal year.
Banking and consumer financing indicators provided further signs of economic activity. Banking sector deposits rose 16% year-on-year to Rs40.8 trillion at the end of September 2026, while consumer automobile financing increased 33.6% to Rs407 billion, marking its 22nd consecutive monthly increase. Fertiliser sales remained mixed, with urea offtake rising 42% to 611,000 tonnes in September as dealers accumulated inventory ahead of the Rabi season. Diammonium phosphate sales declined 30% to 68,000 tonnes amid higher domestic prices. Separately, a committee reviewing the Automotive and Auto Parts Manufacturing Policy 2026-31 proposed measures to encourage exports, increase the adoption of new energy vehicles and strengthen competition. The proposals included lower sales tax on new energy vehicles, reduced import tariffs, mandatory export targets for original equipment manufacturers, localisation requirements and incentives for additional exports.
Other economic pressures remained visible in inflation and public sector liabilities. Weekly Sensitive Price Indicator inflation increased 0.65% week-on-week and 11.85% year-on-year. The Privatisation Commission prequalified 10 bidders for Islamabad Electric Supply Company, while power sector circular debt reached Rs1.7 trillion and gas sector liabilities stood at Rs3.6 trillion as of June 30, 2026. These developments remain relevant to investors evaluating the fiscal outlook, energy sector performance and the potential effects of government reforms on listed companies.
Looking ahead, analysts expect the October 26 monetary policy announcement and the September-quarter corporate earnings season to be major influences on the PSX. A more favourable regional situation could ease pressure on international oil prices and improve expectations for future monetary easing, while renewed tensions could prolong market volatility. The KSE-100 Index is trading at a price-to-earnings ratio of 7.02 times and offering a dividend yield of 7%, according to the cited brokerage assessment. These valuation indicators provide context for the market outlook, but the direction of equities will depend on corporate performance, monetary policy, investor flows and developments in the international energy market.
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