Market Volatility Persists as PSX Reacts to Policy and Legal Developments
Macroeconomic uncertainty continued to cast a shadow over the Pakistan Stock Exchange (PSX) on Tuesday, with the market exhibiting significant volatility following the State Bank of Pakistan's (SBP) unexpected decision to maintain its policy rate at 10.5%. Contrary to widespread expectations of a change, the central bank's stance left investors grappling with mixed signals, contributing to a cautious trading environment.
Index Performance and Trading Dynamics
Trading commenced on a positive note in the morning, with the benchmark KSE-100 index briefly touching an intra-day peak of 189,521 points during the first hour. However, this initial optimism proved short-lived as selling pressure intensified, erasing all early gains. The index subsequently slid to an intra-day low of 187,538 points towards the close of trading. After recouping some losses, it eventually settled at 188,203, marking a decline of 384.80 points or 0.20%.
Ali Najib, Deputy Head of Trading at Arif Habib Limited, described the session as largely uneventful, with the KSE-100 trading sideways before closing down 385 points. He noted that the market lacked clear direction as investors continued to digest the SBP's surprise "no-change" policy decision from the previous day, leading to cautious trading across most sectors.
Key Factors Influencing Investor Sentiment
Constitutional Court Ruling: Investor sentiment was further impacted by a Constitutional Court ruling that upheld Section 4B of the income tax law. This decision reaffirmed parliament's authority to levy income tax and declared earlier high court decisions related to super tax partially invalid. According to Najib, this added a layer of uncertainty for select corporates, compounding the market's cautious mood.
SBP's Forex Interventions: The central bank's active presence in the foreign exchange market remained in focus. Between June 2024 and October 2025, the SBP conducted net forex interventions amounting to $10.8 billion, with $1.03 billion purchased in October alone. These measures are aimed at ensuring external stability, but they also contributed to the broader macroeconomic narrative affecting stock market behavior.
Corporate Results and Sectoral Movements
On the corporate front, Sazgar Engineering announced its 2QFY26 results, posting earnings per share (EPS) of Rs66.56. This represented a 67% year-on-year increase but a 9% quarter-on-quarter decline, falling short of street expectations of Rs73-78. The company also declared a dividend of Rs15 per share, which provided some support but failed to fully offset the disappointment.
JS Global analyst Nawaz Ali observed volatile activity at the PSX, with investors opting to book profits at higher levels and adopting a cautious stance amid geopolitical tensions. Despite attractive valuations, the fragile situation in the Middle East continued to keep investors on the back foot. Ali advised investors to focus on fundamentally strong stocks and take advantage of dips in this uncertain environment.
KTrade Securities commented that the session remained largely range-bound, reflecting cautious investor sentiment. Selling pressure emerged following the SBP's decision to keep the policy rate unchanged, prompting profit-taking, particularly in cyclical stocks. However, some positivity emerged after the central bank reduced capital requirements for banks, resulting in strength across the banking sector.
Top Gainers and Losers
Fauji Fertiliser led the gains during the day, supported by Meezan Bank, Pakistan Petroleum, Systems Limited, and Bank Alfalah. According to Topline Securities, these stocks contributed 949 points to the index. Conversely, Engro Holdings, Engro Fertilisers, Hub Power, Lucky Cement, MCB Bank, and Maple Leaf Cement dragged the index lower, erasing 637 points and offsetting much of the gains.
Market Statistics and Foreign Investment
Overall trading volumes decreased to 749.2 million shares, compared to Monday's total of 870.4 million. The value of shares traded during the day was Rs53 billion. Shares of 486 companies were traded, with 160 stocks rising, 278 falling, and 48 remaining unchanged.
K-Electric was the volume leader, with trading in 90.2 million shares, gaining Rs0.07 to close at Rs7.04. It was followed by Hascol Petroleum, with 47.9 million shares rising Rs0.51 to close at Rs25.49. Foreign investors showed some interest, buying shares worth Rs531.6 million, as reported by the National Clearing Company.
Outlook and Near-Term Expectations
KTrade Securities expects that futures rollover activity and ongoing tensions between Iran and the US may continue to cap the upside in the near term. The results season also continued to influence investor behavior, keeping the overall market trend mixed. As the PSX navigates these multifaceted challenges, market participants are likely to remain vigilant, balancing opportunities against the backdrop of policy surprises and legal uncertainties.
