In February 2026, the KSE-100 Index experienced a notably turbulent month, with a significant 16,112-point decline, ultimately closing at 168,062 points. This downturn can largely be attributed to a confluence of factors, including rising geopolitical tensions, persistent foreign selling pressure, and some disappointing corporate earnings that fell short of expectations.

Adding to the market’s woes were concerns surrounding the Reko Diq project, which further dampened sentiment. The index recorded a striking negative return of 8.7%, marking its largest drop since March 2020, when it fell 26% in a single month.

Despite these challenges, Moody’s introduced a glimmer of optimism by revising Pakistan’s banking sector outlook from positive to stable. This update hinted at a gradual recovery in the operating environment, coupled with improvements in macroeconomic indicators, offering a silver lining amidst the market’s decline.

In a noteworthy advancement for Pakistan’s capital markets, the National Clearing Company of Pakistan Limited (NCCPL) collaborated with the Central Depository Company (CDC), Pakistan Stock Exchange (PSX), and the Securities and Exchange Commission of Pakistan (SECP) to transition the capital market settlement cycle from T+2 to T+1 on February 9, reflecting a modernised trading environment.

Meanwhile, inflation data showed that the Consumer Price Index (CPI) for January 2026 rose 5.8% year-on-year, up from 5.6% in December. In terms of foreign exchange, the country recorded a current account surplus of USD 121 million in January, a significant turnaround from the deficit of USD 393 million reported in January 2025.

However, for the first seven months of the fiscal year 2026, a current account deficit of USD 1,074 million was noted, in contrast to a surplus of USD 564 million during the same period the prior year. On a more positive note, remittances increased by 15% year-on-year in January 2026, totalling USD 3.5 billion, though they declined by 4% month-on-month. Cumulatively, for the first seven months of FY26, remittances rose by 11% compared to the same timeframe last year, reaching USD 23.2 billion. This mix of data paints a complex picture of Pakistan’s economic landscape, where challenges persist, but there are signs of resilience and potential recovery in various sectors.

Courtesy – AHL Research