The Pakistan Stock Exchange (PSX) witnessed a strong rally on Wednesday as investor sentiment turned bullish after the federal government unveiled its FY2025–26 budget. The benchmark KSE-100 Index surged by 2,111.52 points, or 1.73%, to hit an intraday high of 124,135.96. The index also recorded a session low of 123,237.99, still reflecting a significant rise of 1,213.55 points, or 0.9%.
This sharp upward movement marked a continuation of Tuesday’s momentum, when the index had gained 383.44 points, or 0.32%, to close at 122,024.44. Market participants interpreted the budget’s key tax proposals as highly favorable for equities, fueling a buying spree across sectors.
Brokers and analysts noted that the unchanged capital gains tax (CGT) rate of 15% on equities — coupled with higher taxes on interest income — is likely to shift investment preferences towards stocks. The PSX saw increased activity in blue-chip and high-dividend-yielding stocks, indicating renewed confidence in market stability.
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Budget Signals Shift Towards Equity Investments
Independent investment and economic analyst AAH Soomro called the budget a “game-changer” for the capital market. “Lower taxes on equity versus fixed income is a major trigger for PSX. This is just the beginning towards 150,000 in a year,” he predicted, reflecting optimism about the long-term direction of the market.
The government’s fiscal blueprint includes Rs19.3 trillion in revenues against Rs25.8 trillion in expenditures, creating a federal fiscal deficit of Rs6.5 trillion — about 5% of GDP. The overall national deficit is estimated at Rs5 trillion, or 3.9% of GDP. The gap is expected to be closed partially through a Rs1.5 trillion provincial surplus.
Analysts believe this disciplined fiscal approach aligns closely with IMF recommendations, potentially paving the way for continued support from global lenders. This alignment, combined with no new tax burden on the equity market, has sparked optimism among local and foreign investors alike.
Market Eyes Price-to-Earnings Re-Rating
Topline Securities stated in a note that the proposed budget could act as a catalyst for the re-rating of the market’s price-to-earnings (PE) ratio. “If the budget is passed without major changes, it could lift the PE ratio from 5.2x to 7x,” the firm said, suggesting a strong valuation upside for listed companies.
Investors now expect corporate earnings to benefit from both macroeconomic stability and renewed domestic participation in equities. The consistent rise of the KSE-100 over consecutive sessions has rekindled hopes of a sustained bull run.
The Wednesday rally adds to the narrative that Pakistan’s equity market is entering a new phase of growth, driven by prudent fiscal planning and strategic tax incentives. If current trends hold, the PSX could be poised for further gains in the months ahead.
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