KARACHI (The Thursday Times) — The KSE-100 index crossed 180,000 points during trading on Wednesday, after its strongest run in months. It rose 7,477 points last week and another 5,448 on Tuesday alone, when President Donald Trump said military action against Iran was not needed for now. The number sounds like a milestone. It is really a return. The index first went past 180,000 in January, closed the last fiscal year at almost exactly this level, and then spent four months sliding away from it. The question now is not whether Pakistani shares can reach 180,000. It is what it would take for them to stay there and go further.
A round trip, not a breakout
Set against its own recent history, the market has been running in place. On June 30, the last trading day of the 2025-26 fiscal year, the KSE-100 closed at 180,301.70. That capped a 43.5 per cent gain for the year, and a third straight year of exceptional returns after 89 per cent in 2023-24 and 60 per cent in 2024-25. Few markets anywhere matched that run.
The new fiscal year has been harder. The index lost ground in three of the first four months, falling 2.3 per cent in July, gaining half a per cent in August, losing almost 4 per cent in September and another 2.1 per cent in October. By the end of October it stood at 166,409.25, down 7.7 per cent for the fiscal year, its weakest four-month start since 2017-18. Most of that ground has been won back in the first days of November.
The KSE-100 over the past year, in points
Closing levels. The January high and March low are the extremes of the second half of 2025-26. Source: Pakistan Stock Exchange data.
Over a full year the gain is modest. At the end of October the index was just under 3 per cent higher than twelve months earlier. In dollar terms it did slightly better, about 4.5 per cent, because the rupee strengthened against the dollar over the year. That currency stability is one of the market’s less noticed strengths, and a rare one in Pakistan’s recent history.
“The number sounds like a milestone. It is really a return.”
What moved the market this month
The simplest explanation is oil. Pakistan imports most of its energy, so the price of crude runs straight through its trade deficit, its inflation rate and its interest rates. As tensions built and then the war with Iran began on February 28, the index fell hard, losing almost 9 per cent in February and 11.5 per cent in March, and touching its low of 146,480 on March 9. Petrol, which cost Rs266.17 a litre at the end of February, peaked at Rs458.41 in early April.
The reverse has been happening this month. Brent crude fell to around $90 a barrel on Tuesday, its lowest level since late August, as Washington played down the need for further strikes on Iran. The government cut petrol by Rs8 to Rs338 a litre the same day, the second cut in less than a week. Every dollar off the price of a barrel eases the pressure on the external account and, in time, on prices at home.
The rally has also been broad. On Tuesday buying ran through commercial banks, cement, fertiliser, car assemblers, oil and gas explorers and power producers. Banks matter most, because they carry the most weight in the index, and analysts have been revising up their earnings forecasts for several of the largest lenders.
The home economy has helped. Workers’ remittances reached $3.89 billion in October, 13.8 per cent more than a year earlier, according to the State Bank of Pakistan. The central bank’s reserves have passed $21.5 billion, the highest in the country’s history and roughly three months of import cover, and the current account deficit for July to September was a manageable $874 million. On October 7 Pakistan and the International Monetary Fund reached a staff-level agreementA deal between IMF staff and a government on a programme review. It still needs approval by the IMF’s executive board before money is paid out. on the fourth review of its loan programme. If the IMF board approves it in December, as the finance minister expects, about $1.2 billion will follow.
The backdrop in four numbers
Sources: State Bank of Pakistan, Pakistan Bureau of Statistics.
The interest-rate problem
There is one large difference between this rally and the run of the past three years. Those gains came as interest rates fell from record highs and inflation collapsed. This one is happening while rates are rising.
On October 26 the State Bank’s Monetary Policy Committee raised the policy rate by half a percentage point to 12 per cent, by nine votes to one. It cited the renewed escalation in the Middle East, high energy prices and disruption to wheat supplies, after inflation reached 10.3 per cent in September, well above the target range of 5 to 7 per cent. Core inflation, which strips out food and energy, was around 8.4 per cent.
Higher rates make bank deposits and government bills more attractive against shares, and they raise borrowing costs for listed companies. That is why the market drifted lower through October, and why its recovery depends so heavily on oil. Inflation eased to 9.6 per cent in October. If cheaper fuel brings it down further, the case for another rise weakens and the case for a cut returns. If oil climbs again, the central bank has made clear it will act.
“Past rallies came as interest rates fell. This one is happening while they rise.”
Who is buying
The flows tell a quieter story than the headlines. Foreign investors were net buyers in July for the first time in 23 months, but they have mostly been sellers since. In October they sold a net $71.3 million of shares. Almost all of it came from foreign corporates, which sold a net $82.3 million, while overseas Pakistanis bought a net $11.1 million. Over the whole of the last fiscal year, foreign corporates sold a net $895 million, although part of that came from two large company divestments.
Who bought and sold in October
Source: National Clearing Company of Pakistan data on foreign and local investor flows.
Local investors absorbed the whole foreign outflow. Individual investors accounted for about three-quarters of local buying in October, and companies, banks and other local institutions were net buyers too. Mutual funds, by contrast, were the largest local sellers. A market carried by individual savers can move fast in both directions. Lasting gains usually need the institutions, local and foreign, to commit.
The market is also small for an economy of Pakistan’s size. At the end of October the companies in the KSE-100 were worth about Rs4.66 trillion, or $16.8 billion. That is part of the attraction for investors looking for value, and part of the reason that a few days of foreign selling can move the index so sharply.
What could knock it back
The first risk is the one that has driven everything this year. Iran still says the Strait of Hormuz will stay shut until the United States meets its conditions, and ships in and around it are still being hit. Maritime monitors have counted at least 37 attacks so far this month. If hopes of a settlement fade and oil jumps again, Pakistan’s import bill, its inflation and its interest rates would all move the wrong way, and the index with them. Markets rallied on Tuesday on a single remark from Washington. They can fall on a single headline from the Gulf.
The second is energy finance at home. Circular debtThe chain of unpaid bills in the power and gas sectors, where distribution companies, power plants, fuel suppliers and the government all owe each other money. in the power sector stood at Rs1.675 trillion at the end of June, and liabilities in the gas sector at Rs3.631 trillion. This week Sui Northern Gas Pipelines warned that Rs169.27 billion in unpaid bills from power producers was straining its cash and could affect payments for imported liquefied natural gas. Oil and gas companies are among the heaviest stocks in the index, and their share prices are tied to how quickly that money moves.
The third is the programme itself. The IMF board meeting in December is expected to be routine, but each review brings conditions on revenue, energy prices and spending. The IMF has been pressing for a much higher tax take. Development spending in the first four months of the year reached only about a tenth of its annual allocation, a sign of how tightly the budget is being held. Any slippage would be noticed quickly by the investors who sold in October.
What would sustain it
None of these risks is new, and the market has absorbed far worse this year. Between its January high and its March low it lost more than a fifth of its value, and it was back above 168,000 by mid-April. The fundamentals that carried it through the past three years are largely intact: a stable rupee, record reserves, rising remittances and an IMF programme on track.
What would turn a return to 180,000 into a move beyond it is clearer than usual. A durable settlement in the Gulf that reopens Hormuz would do more for Pakistani shares than any domestic measure, because it would bring down oil, then inflation, then interest rates. A turn in the rate cycle would follow. Steady earnings from the banks and the energy companies, and visible progress on circular debt, would give foreign institutions a reason to return.
Until then, the index will keep trading on the news from Tehran and Washington. Wednesday’s figure is a sign of confidence that the worst of the war’s economic shock has passed. Whether it becomes a floor or a ceiling will depend less on Karachi than on the Strait of Hormuz.
