Shares at the Pakistan Stock Exchange (PSX) staged a remarkable recovery on Friday, regaining nearly 4,000 points following a day of historic losses, triggered by escalating geopolitical tensions between Pakistan and India. The stock market had been severely impacted the previous day when India launched drone attacks on major Pakistani cities, causing significant disruptions and a staggering Rs820 billion loss for equity investors.
The benchmark KSE-100 index saw a sharp rebound on Friday, gaining 799.65 points or 0.77 percent by 11:06 AM, climbing from the previous close of 103,526.81 to 104,326.46. As trading progressed, the market continued its upward trajectory, with the index recovering 3,647.82 points, or 3.52 percent, by 4:31 PM. The KSE-100 index ended the day at 107,174.63, recovering substantial losses from the previous day’s sharp decline.
According to Mohammed Sohail, CEO of Topline Securities, the sharp dip in the market on Thursday, which saw a 6 percent drop, was followed by a recovery as investor sentiment improved. “After a significant decline, stocks have managed to recover. Importantly, there has been no major escalation in the situation, which has helped restore investor confidence,” Sohail explained.
Yousuf M. Farooq, Director of Research at Chase Securities, added that the market remained volatile but showed signs of recovery. He noted that investors were beginning to factor in that an all-out war with India was unlikely. “The market opened higher today as participants started to accumulate stocks that were now trading at attractive valuations, following the sharp market dip over the past week,” Farooq said. Technical analysts also pointed out that the market had entered oversold territory, which suggested that the market was ripe for a bounce-back.
Farooq also highlighted that the decline on Thursday was primarily driven by individual investors unwinding leveraged positions and mutual fund redemptions. “Such corrections and short-term volatility are a normal feature of equity markets,” he said. His advice to investors was clear: “Only long-term investors should participate in the market, maintaining discipline during periods of uncertainty while gradually building their portfolios over time.”
Investor sentiment was further buoyed by the upcoming meeting of the International Monetary Fund (IMF), which was expected to approve Pakistan’s next tranche of financial assistance. According to Sana Tawfik, Head of Research at Arif Habib Limited, optimism about the IMF’s decision played a significant role in the market’s recovery. “The IMF Executive Board is likely to approve the $1 billion tranche today, which will provide much-needed financial support for Pakistan,” Tawfik noted. In addition to the approval of the immediate disbursement, the IMF was also expected to approve the $1.3 billion Resilience and Sustainability Facility (RSF) for Pakistan.
Tawfik further emphasized that the market provided attractive valuations due to the sharp dip in stock prices, making it an ideal time for investors to make strategic purchases. She also observed that fears regarding a major escalation in the geopolitical situation had been alleviated, as there were no new developments on that front.
Awais Ashraf, Director of Research at AKD Securities, also pointed out that the panic caused by the Indian drone attacks had begun to subside. He noted that Pakistan’s military response, which included the interception of several drones and the downing of Indian fighter planes, had reassured investors. “The recent market correction following the geopolitical escalation has presented investors with a valuable opportunity to buy stocks at attractive valuations,” Ashraf explained.
The stock market had taken a significant hit in the previous sessions, losing Rs1.3 trillion in market capitalization as jittery investors rushed to exit the market amid growing uncertainty. The political and military tensions, which escalated following the Indian missile strikes that targeted three Pakistani cities, had left investors uncertain about the economic outlook. The market crash was further exacerbated by fears of continued military standoffs, especially after reports revealed that Pakistan’s armed forces had neutralized 25 Indian drones, with one drone partially striking a military target.
However, with the military situation stabilizing and key economic factors such as the IMF meeting looming, investor sentiment was notably more positive on Friday. Despite the volatility, analysts advised that long-term investment strategies were the best course of action in such uncertain times, with many suggesting that now is an ideal time to invest in undervalued stocks.
In conclusion, the PSX’s recovery on Friday demonstrated the resilience of the Pakistani stock market, with investor confidence returning as geopolitical tensions eased and the prospect of IMF financial assistance offered a boost. As the market continues to recover from the sharp losses earlier in the week, investors are hopeful that the worst of the volatility has passed and that there are opportunities ahead for those willing to navigate the uncertainties with a long-term outlook.