PSX Soars as SBP Cuts Interest Rate by 250bps

The Pakistan Stock Exchange (PSX) has witnessed a remarkable surge in buying momentum, particularly following the State Bank of Pakistan's (SBP) recent decision to cut the interest rate by 250 basis points. This significant reduction has brought the policy rate down to 15%, marking the fourth consecutive rate cut since June 2024. The KSE-100 Index, which is the benchmark for the PSX, closed at an impressive 92,304.32 points, gaining 366.32 points or 0.40%. This is a historic achievement as it is the first time the index has closed above the 92,000 mark.

On Tuesday, the trading session began on a positive note, with the KSE-100 reaching an all-time intra-day high of 92,514.30 points. Although there was a brief period of selling that pushed the index down to an intra-day low of 91,536.09, the latter hours of trading saw a strong buying spree that ultimately led to the record close. According to Topline Securities, the positive trend is largely attributed to the SBP's recent Monetary Policy Committee (MPC) decision, which has instilled confidence among investors.

Furthermore, the SBP governor's reassurances regarding key economic indicators have played a crucial role in boosting investor sentiment. Major contributors to the day's gains included companies such as LUCK, HUBC, OGDC, SYS, and MTL, which collectively added 274 points to the index. However, not all stocks performed well; UBL, HBL, BAHL, CHCC, and MEBL were among the major laggards, subtracting a total of 143 points from the index.

The MPC's decision to cut the interest rate was unexpected, as analysts had anticipated a reduction of only 200 basis points. The committee noted that inflation has decreased more rapidly than anticipated, nearing its medium-term target range. Factors contributing to this decline include a drop in food inflation, favorable global oil trends, and no expected adjustments in gas prices.

In the broader context, the PSX has been on a positive trajectory, closing 1.2% higher at 91,938.01 points on Monday, just ahead of the monetary policy announcement. Globally, stock markets have shown mixed results, with investors awaiting the outcome of the U.S. elections. Meanwhile, oil prices have remained stable, with Brent crude futures trading at $75.08 a barrel.

On the currency front, the Pakistani rupee experienced a slight decline against the US dollar, settling at 277.84 after a 0.02% depreciation. Trading volume on the all-share index surged to 752.66 million shares, up from 589.55 million the previous day, indicating increased market activity. Power Cement led the volume with 66.26 million shares traded, followed by Sui South Gas and Fauji Foods Ltd.

The recent interest rate cut by the SBP has not only propelled the PSX to new heights but has also instilled a sense of optimism among investors. As the market continues to respond positively to economic indicators, it is essential for investors to remain vigilant and informed. The current momentum at the PSX could pave the way for further growth, but it is crucial to monitor global economic trends and local developments that may impact market performance.