FY25: KSE-100 value up over 55pc in terms of dollars

KARACHI: The KSE-100 Index delivered a stellar performance in FY25, surging by 58.6 per cent in the rupee terms (55.5 per cent in US dollars) to close at 124,379, up from 78,445 at the end of FY25.

This remarkable rally was driven by aggressive monetary easing, improved market liquidity, and the unlocking of fundamental value across key sectors, a research report by Arif Habib Ltd (AHL) stated.

At the same time, the FY25 also witnessed record market participation, with the highest-ever trading volumes and the highest traded value since FY21.

FUNDAMENTALS

During FY25, the State Bank of Pakistan (SBP) slashed the policy rate from 21.5 per cent to 11 per cent, marking one of the most aggressive easing cycles in the country’s history.

Moreover, Fitch Ratings upgraded Pakistan’s credit rating from CCC+ to B- following successful staff-level agreements with the IMF on the $7bn Extended Fund Facility and the $1.3bn Resilience and Sustainability Facility.

During FY25, MSCI added five Pakistani companies to its Frontier Market Index as part of its latest semi-annual review, boosting Pakistan’s estimated weight in the index from 3.7 per cent to 6.1 per cent.

On the fiscal front, the deficit narrowed to Rs6.4tr or 5.6 per cent of GDP in FY25, down from Rs8.4tr or 6.4 per cent of GDP in FY24.

Moreover, GDP grew by 2.68 per cent year-on-year in FY25, with the size of the economy reaching an all-time high of $411bn. Moreover, per capita income rose to $1,824.

The external account also strengthened significantly. Pakistan posted a current account surplus of $1.8bn during July-May 2024-25, a sharp turnaround from a deficit of $1.57bn in the same period last year, the Arif Habib Ltd report said.

Meanwhile, the rupee depreciated by a modest 1.9 per cent against the US dollar FY25.

Inflation cooled considerably, with average annual CPI inflation falling to 4.61 per cent during Jul-May FY25, compared to 24.52 per cent in the same period of FY24.

Despite the above gains, geopolitical tensions jolted the market during the year, with sharp declines triggered by escalations between Pakistan and India in May 25, and Iran and Israel in Jun 25. However, subsequent ceasefires fuelled some of the strongest market rallies in recent history, the report added.

OUTSHINING GOLD

The KSE-100 exhibited a strong performance across all asset classes, boasting a FY25 return of 55.58 per cent, significantly outperforming Gold (47.56 per cent), T-Bills (12.68 per cent), DSC (12.61 per cent), Bank Deposits (12.60 per cent), PIBs (11.97 per cent), and US dollar/rupee (1.91 per cent). Even the historical gains from Gold and T-Bills in recent times have been unable to match the impressive surge of the equity market.

The KSE-100’s CAGR is higher than all other asset classes in every long-term benchmark, from a 5-year holding period to a 20-year holding period.

This performance suggests that the KSE-100, particularly the equity market, is the most lucrative asset class for investors with a long-term horizon in Pakistan.

IPO

The market in FY25 showcased a promising landscape for equity capital raising, with a total of Rs4.19bn raised through three successful Initial Public Offerings (IPOs).

It highlights a diverse range of sectors, including pharmaceuticals with BF Biosciences Ltd raising Rs1.93bn, technology and communications with Zarea Ltd contributing Rs1.03bn, and food and personal care with Barkat Frisian Agro Ltd adding Rs1.23bn.

As the economic environment continues to improve and interest rates show signs of stabilization, investor enthusiasm is on the rise, paving the way for an even more vibrant IPO market in FY26.

VOLUME LEADERS

Sectors that garnered the most activity during the month were technology, banks, cement, power, and refineries, reporting average volumes of 101mn, 57mn, 54mn, 47mn and 44mn respectively.

Meanwhile, trading volume were led by WTL (50.9mn), KEL (30.6mn), CNERGY (29.5mn), BOP (22.5mn) and KOSM (18.4mn).

VALUE LEADERS

On a sector-wise basis, the most activity during the period was witnessed in E&P, cement, OGMCs, banks and automobile assemblers, posting a trade value of $12mn, $11mn, $10mn, $9mn, and $9mn, respectively.

Meanwhile, on a scrip-wise basis, the highest trading values were dominated by PSO ($4.8mn), followed by OGDC ($4.1mn), MARI ($4.0mn), HUBC ($3.9mn), and PPL ($3.4mn).

SECTOR-WISE MAJOR GAINERS AND LOSERS

In terms of sectors, major gainers were leasing (224 per cent), woollen (196 per cent), investment banks (130 per cent), OMCs (109 per cent) and fertilizer (106 per cent) during FY25.

Conversely, major losers were automobile parts (-20 per cent), vanaspati (-18 per cent), synthetics (-17 per cent) and engineering (-8 per cent).

SCRIP-WISE MAJOR GAINERS AND LOSER

Scrip-wise major gainers during FY25 were witnessed in PGLC, NBP, BNWM, GLAXO, and FFC, posting returns of 224 per cent, 222 per cent, 196 per cent, 177 per cent, and 169 per cent, respectively. Meanwhile, negative returns during the month came from MEHT, EPCL, MUGHAL, THALL, and UNITY, each posting returns of -46 per cent, -30 per cent, -22 per cent, -20 per cent, and -18 per cent.

REGIONAL PORTFOLIO INVESTMENT AND FIPI

In FY25, widespread net selling by foreigners was observed across all listed regions. Taiwan recorded the highest outflow of $28,783mn, followed by South Korea $23,577mn, and India $11,263mn.

Outflows were also seen in Malaysia at $3,546mn, Vietnam $3,101mn, and Thailand $3,207mn.

Relatively smaller net sales were recorded in Indonesia at $1,634mn, Philippines $477mn, Pakistan $300mn, and Sri Lanka $41mn.

OUTLOOK AND RECOMMENDATION

“As we step into the new fiscal year, FY26, the outlook appears promising, with real GDP projected to grow by 3.34 per cent, in our view. This growth is expected to be driven primarily by a revival in the agriculture sector, while the services and industrial sectors are also likely to support momentum amid a more stable macroeconomic environment,” the AHL report added.

The external account is expected to face mild pressure in FY26. After a projected surplus of $1.6bn in FY25, the current account is likely to slip into a modest deficit of $1.6bn, reflecting a gradual increase in import demand amid improving economic activity. That said, remittance inflows are anticipated to edge up to $39.3bn, (in our view) offering some support, backed by a growing number of overseas workers.

Meanwhile, the rupee is expected to remain around Rs301 per dollar by Jun 26, helped by timely external inflows and continued focus on managing the external balance.

Inflation is expected to edge up to 6.10 per cent in FY26 (FY25: 4.52 per cent), as the high-base effect fades and domestic demand gradually picks up. Nonetheless, the price trend remains contained, allowing the SBP to continue its monetary easing cycle, with a further 100bps cut expected to bring the policy rate to 10.0 per cent.

In July 2025, the expected Rs1.40/KWh reduction in the base electricity tariff may offer short-term relief and help ease inflationary pressure. Additionally, pending payments to IPPs under the circular debt clearance process could help improve liquidity in the energy sector.

Meanwhile, capital markets remain attractively valued. The KSE-100 Index is currently trading at a forward PER of 6.4x (2025) against its 10-year average of 8.0x, offering a compelling dividend yield of 8.4 per cent versus the historical average of 6.5 per cent.

“Our top picks include OGDC, PPL, PSO, FFC, FCCL, HUBC, NBP, UBL, SYS, MEBL, and AIRLINK,” the AHL report went on to add.