The Pakistan Stock Exchange (PSX) has kicked off the new year with an extraordinary rally, propelling the benchmark KSE-100 index to a series of unprecedented highs. Investor confidence, fueled by robust performances in key sectors and positive macroeconomic signals, has driven the market to a historic peak.
A Week of Record-Breaking Gains
The bullish momentum that characterized the end of 2025 carried powerfully into the first week of 2026. According to analysts at Arif Habib Limited (AHL), the KSE-100 index climbed from last week's close of 172,401 points to a stunning 179,035 points this Friday. This represents a massive weekly gain of 6,634 points, or 3.9% week-on-week.
The rally was broad-based and sustained throughout the week. The market opened the year with a strong session on Monday, with the index closing at a new all-time high of 173,896, up 1,496 points. The upward trajectory continued on Tuesday, reaching 174,472. After a modest correction on the final day of 2025, the new year began with a powerful surge of 2,301 points on Thursday, closing at 176,355. The week culminated on Friday with the index soaring another 2,679 points to settle at the historic 179,035 mark.
Sectoral Drivers and Economic Backdrop
Analyst Syed Danyal Hussain of JS Global highlighted that the weekly rally was led by significant contributions from major sectors. Banking stocks were the primary engine, contributing 45% to the index's gain. They were followed by the exploration & production sector (18%) and the fertiliser sector (13%). Market activity also intensified, with average daily turnover rising by a notable 41% week-on-week.
The bullish sentiment is underpinned by encouraging economic data. The National Accounts Committee reported that Pakistan's economy expanded by 3.71% in the first quarter of FY26 (1QFY26). This marks a significant improvement from the 1.56% growth in 1QFY25, though it moderates from the 6.17% seen in the previous quarter (4QFY25). The growth was primarily driven by a robust 9.38% year-on-year increase in industrial output, alongside expansions in agriculture (2.89%) and services (2.35%).
In another positive development, inflation showed a moderating trend. The Consumer Price Index (CPI) for December 2025 clocked in at 5.6% year-on-year, down from 6.1% in November 2025.
Fuel Sales, Reserves, and Corporate Moves
Data from the energy sector presented a mixed picture. Sales by Oil Marketing Companies (OMCs) in December 2025 rose 6% year-on-year to 1.35 million tons, though they declined 5% month-on-month. Cumulative offtake for the first half of FY26 reached 8.16 million tons, reflecting a 2% annual increase. Overall refinery sales saw a marginal 0.9% yearly increase, supported by stronger motor spirit and furnace oil offtake, which offset an 8.6% yearly decline in high-speed diesel sales to 396k tons.
The government adjusted fuel prices downward. The price of motor spirit fell by Rs10.28 per litre to Rs253.17, while high-speed diesel decreased by Rs8.57 per litre to Rs257.08.
On the external front, the State Bank of Pakistan's foreign exchange reserves saw a slight increase of $12.6 million, bringing the total to $15.9 billion. However, commercial bank reserves dipped by $23 million to $5.1 billion. The trade deficit for December 2025 widened to $3.7 billion, up 24% year-on-year, largely due to a 20% drop in exports.
At the corporate level, a major consolidation move was witnessed in the telecom sector as PTCL completed the acquisition of Telenor Pakistan and Orion Towers.
Market Outlook and Conclusion
The PSX's record-breaking performance sets a powerfully optimistic tone for the new year. The combination of strong sectoral performances, particularly in banking and energy, improved GDP growth figures, and a slight easing of inflationary pressures has created a fertile ground for investor optimism. The significant increase in trading volume indicates heightened market participation and confidence.
While challenges remain on the external front, as evidenced by the widening trade deficit, the domestic economic indicators and corporate actions like the PTCL acquisition point towards a dynamic and evolving market landscape. Analysts will be closely watching to see if this bullish momentum can be sustained in the coming weeks, setting the stage for what could be a transformative year for Pakistan's capital markets.
