The PSX is positioned for strong performance in CY26, driven by multiple tailwinds: a rotation from fixed income to equities, continued IMF support, greater political stability, an improved international image, and regional calm following the May ’25 ceasefire.

Further catalysts include expected defense agreements, declining CDS spreads, sovereign rating upgrades, moderating inflation, lower interest rates, a stable PKR/USD, and improving market liquidity. Growth is amplified by surging new PSX accounts and rising mutual fund AUM. Trading at a deep discount to regional averages, the KSE-100 offers an attractive entry for alpha-seeking investors. We estimate the KSE-100 Index to reach 206,908 points by Dec’26. This upward trajectory will be driven by a projected 7.5% corporate earnings growth and a 6.0% dividend yield.

Pakistan’s economy is on track for sustained recovery, with GDP growth projected at 3.2% in FY26 and 3.9% in FY27. This growth is supported by growth in the industrial and service sectors as lower interest rates and a stable PKR reduced the cost of production. Inflation is expected to moderate to 7-8%YoY in FY26, aided by stability in PKR against USD, moderate commodity price fluctuations, and completion of major energy tariff adjustments.

·         The IMF agreement has significantly bolstered investor confidence, creating a foundation for sustained economic stability. This is further reinforced by a clear sovereign debt management strategy, strong FDI commitments from allied nations, and an ambitious privatization agenda for major state-owned enterprises. High-impact developments, such as the operationalization of the Reko Diq project, corporate tax reforms and comprehensive energy sector reforms driven by the SIFC, are strategically enhancing Pakistan’s profile as a premier investment destination. The resolution of the circular debt crisis and the introduction of streamlined investment policies present a tangible opportunity for investors to capitalize on this positive momentum, with the Pakistan Stock Exchange (PSX) serving as a direct gateway to this growth narrative

Courtesy – AL Habib Capital Markets (Pvt) Limited