By Moaaz Manzoor

The Pakistan Stock Exchange (PSX) posted a strong recovery during the third week of June, with the benchmark KSE-100 Index gaining 6,523 points, or 3.79% week-on-week, to close at 178,923 points, as investor sentiment improved following the FY27 budget announcement, easing geopolitical tensions in the Middle East and supportive macroeconomic developments.

The market remained firmly positive for most of the week as investors responded favourably to supportive budget measures, expectations of progress in US-Iran negotiations and a decline in international oil prices. However, some of the gains were pared on the final trading day amid reports of delays in talks over a permanent US-Iran peace agreement and renewed regional hostilities, triggering profit-taking in heavyweight stocks.

According to Arif Habib Limited (AHL), banking stocks emerged as the largest contributors to the benchmark index, adding 2,047 points during the week. Cement companies contributed 732 points, followed by investment banks with 663 points, exploration and production companies with 634 points and power sector stocks with 416 points.

Only a few sectors weighed on the market. Property stocks shaved off 53 points from the benchmark index, while automobile parts, sugar, woollen and synthetic and rayon sectors made marginal negative contributions.

At the company level, United Bank Limited remained the biggest positive contributor, adding 1,018 points to the index. Engro Holdings contributed 529 points, followed by Hub Power Company with 399 points, Pakistan Petroleum Limited with 377 points and Oil and Gas Development Company with 300 points.

Among the laggards, JVDC reduced the benchmark index by 53 points, while TRG Pakistan eroded 38 points. Mari Petroleum, Pakistan Oilfields and Habib Metropolitan Bank also contributed negatively to overall market performance.

AKD Securities attributed the rally to a combination of domestic and international factors. It noted that optimism surrounding a potential US-Iran understanding pushed international oil prices below $80 per barrel, their lowest level in three months, improving the outlook for Pakistan's external account and inflation trajectory.

The brokerage house also highlighted the FY27 federal budget as a major positive catalyst, noting that several sectors, including cement, steel, refineries, textiles, pharmaceuticals and technology, benefited from proposed fiscal measures. Investor sentiment was further supported by the State Bank of Pakistan's decision to maintain the policy rate unchanged during its latest Monetary Policy Committee meeting.

Market participation improved significantly during the week. According to AHL, average daily trading volumes increased 47.8% week-on-week to 1.15 billion shares, while average daily traded value surged 118% to $226 million. AKD Securities estimated average daily volumes at 1.4 billion shares compared with 900 million shares in the preceding week, reflecting strong investor interest across the market.

Despite the strong weekly performance, the market ended the week on a cautious note. Ali Najib, Deputy Head of Trading at Arif Habib Limited, said investors opted for profit-taking ahead of the weekend as uncertainty resurfaced regarding the timing of negotiations on a permanent US-Iran peace agreement and Tehran's nuclear programme.

The KSE-100 Index recorded an intraday high of 182,186 points and a low of 175,086 points during the week, highlighting the sharp swings in investor sentiment driven largely by geopolitical developments.

Looking ahead, analysts expect the market to remain sensitive to developments in the Middle East, particularly the evolving US-Iran situation. However, improving macroeconomic indicators, stable interest rates, expectations of lower energy prices and attractive market valuations are expected to continue supporting investor confidence. According to AHL, the KSE-100 Index is currently trading at a price-to-earnings ratio of 8.3 times and offers a dividend yield of 6.1%, suggesting valuations remain favourable despite the recent rally.

Credit: INP-WealthPk