KSE100 surged ahead and moved in new high territories during October and recorded its highest monthly increase of 9.7% (+7852 points to close at 88,966) since Nov 2023. The market has been majorly influenced by changing macro-outlook amid a significant decline in short-term market interest rates (Treasury bills yields), which have plunged below 14% from around 15.5% by the end of September. Consensus view on policy rate reduction during FY25 is now 13%-14% (prevailing policy rate is 17.5% adjusted in September).
Equities have begun to go through re-rating and expansion in valuation as interest rates are now expected to stay lower (compared to recent highs). During the month, projections on inflation were revised downward from lower double-digit (11%-13%) to upper single digit (8-9.5%). For the second month in a row, FFC was the top performer, gaining 28% (+22% in September), and it alone contributed 1324 points in the total gains. Other top contributors were PPL (35%), OGDC (20%), SYS (21%), and PSO (38%). Index heavy weight banking sector mostly underperformed during October, while Pharma and cements outperformed. Foreigners remained net sellers (-$75.15mn) while mutual funds were the top buyers (+68.56mn) during October as domestic liquidity is gradually moving towards equity funds.