In the international exchange market, the US dollar has continued to weaken in relation to the Pakistani rupee.

The dollar fell to Rs278.10 from Rs278.17 at the beginning of interbank trading, according to currency dealers, a seven paisa loss.

In the meantime, there was a lot of turbulence in the stock market, but it recovered and moved into the positive zone. The KSE-100 index recovered momentum and reached 116,000 points after soaring 1,300 points.

Both currency and stock market swings, according to analysts, are a reflection of ongoing market adjustments and economic uncertainty.

On December 2, core inflation as determined by the Consumer Price Index (CPI) significantly slowed, falling to 4.9% in November 2024 from 7.2 percent in October 2024.

The CPI-based inflation rate for the same month last year (November 2023) was 29.2%, according to PBS data.

Compared to a 1.2% gain in the prior month, it increased by 0.5% month over month in November 2024.

On Monday, the Pakistan Stock Exchange (PSX) experienced a significant increase as the benchmark KSE-100 Index exceeded the 115,000-point threshold for the first time ever.

The trading session commenced robustly, with the KSE-100 Index attaining an intraday peak of 115,826.94 points before stabilizing at 115,443 points at lunchtime.

This milestone follows last week’s unprecedented performance, with the index closing at 114,301 points, an increase of 5,247 points.

Market analysts indicate that the increase is supported by strong remittance inflows, decreasing inflation, and anticipated monetary policy relaxation by the State Bank of Pakistan (SBP).

The Monetary Policy Committee (MPC) will publish its decision later today, with economists forecasting a rate reduction of 200 to 500 basis points.

Robust economic fundamentals propel the rise.

The exceptional performance of the PSX corresponds with overarching economic advancements. The inflation rate for November decreased to 4.9%, creating substantial capacity for monetary easing, while the government’s choice to reduce National Savings Schemes (NSS) profit rates by 250 basis points is reallocating capital to the equity market.

Furthermore, remittances rose by 29% year-over-year to $2.9 billion in November, enhancing foreign reserves to $16.6 billion as of December 6, 2024. The reserves maintained by the SBP increased to $12.051 billion, reaching their peak since March 2022.

The Current Account Deficit (CAD) significantly decreased, declining 79% year-on-year to $217 million in the initial two months of FY2025, bolstered by solid exports and robust remittance inflows.

Market Capitalization and Trading Volume Surge

Last week, the PSX established several records, including a market value over $52 billion—the largest in three years—and daily share trading volumes topping Rs1.5 billion. A cumulative 6.81 billion shares valued at Rs302 billion were exchanged, with the index oscillating within a range of 7,546 points during the week.

The bullish trend persisted into Monday, as enterprises and investors maintained optimism on macroeconomic stability and the prospect of substantial monetary easing.

Favorable indicators across many sectors

Economic activity has accelerated, as automotive sales increased by 52% year-on-year in November, indicating strong consumer demand. The banking sector has demonstrated enhancement, as the advance-to-deposit ratio (ADR) rose to 47.8% in November from 44.3% in October.

The government’s initiatives to improve the power distribution infrastructure and enhance social protection programs have significantly strengthened investor confidence. Last Monday, the Asian Development Bank (ADB) sanctioned $530 million in loans to facilitate these projects.

Anticipation surrounding the SBP announcement

The market’s performance indicates a reduction in political concerns and an optimistic forecast for the nation’s economic recovery. Analysts anticipate that the SBP’s policy rate decision will bolster positive momentum, especially if the central bank chooses to implement a substantial rate reduction.

Exports are anticipated to total $33 billion, while remittances are estimated to reach $33.5 billion by the conclusion of FY2025, suggesting that the PSX will likely continue its upward trajectory in the forthcoming weeks.

A market expert stated, “The KSE-100 Index’s historic milestone highlights revitalized investor confidence in Pakistan’s economic prospects.” “Continued macroeconomic stability and favorable policies will sustain this momentum.”