PSX Ends Five-Week Rally as KSE-100 Drops 1,433 Points Amid Volatility and Profit-Taking
In the high-stakes world of emerging markets, few spectacles rival the dramatic swings of the Pakistan Stock Exchange (PSX). On Friday, October 10, 2025, the benchmark KSE-100 index capped off a rollercoaster session with a sharp 1,433-point decline, or 0.87%, settling at 163,098. This marked the end of a remarkable five-week winning streak, during which the index had surged impressively. For the week, however, it shed a cumulative 5,892 points—a hefty 3.49% drop—leaving investors to ponder whether this is a healthy correction or the harbinger of deeper troubles.
As Ali Najib, Deputy Head of Trading at Arif Habib Ltd, astutely observed, "This decline marks the end of a five-week winning streak, with the index losing 5,892 points (-3.49%) for the week." Najib's commentary underscores the abrupt shift from euphoria to caution, a sentiment echoed across trading floors in Karachi. The session itself was a masterclass in volatility: the index plunged over 2,000 points intra-day to a low of 162,411 before clawing back some ground in a swift rebound. Yet, as the closing bell approached, profit-taking in heavyweight sectors like banking, power, and oil & gas dragged it lower once more. This wasn't just a blip; it was a stark reminder of the PSX's inherent unpredictability, fueled by global cues, domestic politics, and the ever-present shadow of economic reforms.
To understand the gravity of Friday's tumble, it's worth zooming out. The KSE-100, comprising the top 100 companies by market capitalization across 34 sectors, has been a bellwether for Pakistan's economic fortunes. Over the past year, it has rocketed an astonishing 90.80%, reflecting renewed investor confidence post-IMF bailout and easing inflation trends. The five-week rally leading into October had pushed it to all-time highs near 170,000, driven by foreign inflows and optimism around fiscal consolidation. Technical analysts had even forecasted a pullback toward the 164,000 support level after breaching the 170,000 mark, a prediction that played out with eerie precision.
But what triggered this week's reversal? Profit-taking was the immediate culprit, as overbought conditions lured sellers into locking in gains. Broader market dynamics amplified the pain: rising U.S. Treasury yields pressured emerging market assets, while a strengthening U.S. dollar squeezed liquidity in rupee-denominated trades. Domestically, the PSX grappled with mixed signals—geopolitical flare-ups on the western border and a slight uptick in inflation added to the unease. Despite the downturn, trading volumes remained robust at 1.39 billion shares, with a total value of Rs47.7 billion, signaling that participation hasn't waned. K-Electric (KE), the beleaguered power utility, stole the show as the volume leader, clocking nearly 200 million shares traded—a nod to heightened interest in its unfolding ownership saga.
Speaking of K-Electric, Friday's market jitters coincided with two landmark Memorandums of Understanding (MoUs) that could reshape Pakistan's energy landscape. In a high-profile ceremony at the Sindh Chief Minister's House on October 9, Saudi investor Prince Mansour bin Mohammed Al Saud inked deals signaling a major pivot in KE's ownership. The first MoU involves the sale of shares in KES Power Ltd, KE's parent company, from Pakistani businessman Shehryar Chishti to Prince Mansour, effectively resolving a protracted legal tussle that had ensnared the Sindh High Court. The second agreement, between K-Electric and Trident Energy Ltd, explores strategic collaborations and fresh investments in the power sector.
This Saudi ingress is no small affair. Valued at a potential $1.77 billion—plus $270 million in performance bonuses—the deal follows the dramatic exit of Chinese firm Shanghai Electric Power, which abandoned its acquisition bid after years of regulatory hurdles and tariff disputes. Hosted by Sindh Chief Minister Syed Murad Ali Shah and attended by a 30-member Saudi delegation led by Prince Mansour, the signing underscores Riyadh's deepening footprint in Pakistan's infrastructure. For KE, Pakistan's sole vertically integrated utility serving over 3.5 million customers in Karachi and beyond, this could inject much-needed capital for grid upgrades and renewable transitions. Yet, in a market where power sector stocks bled red on Friday, the irony is palpable: positive news failed to stem the tide of broader sell-offs.
As stocks reeled, geopolitical tensions erupted on Pakistan's western flank, casting a long shadow over investor sentiment. Afghanistan's Taliban-led administration leveled serious accusations against Islamabad, claiming Pakistani forces violated Afghan airspace on October 9, bombing a civilian market in the Margha area of Paktika province near the Durand Line. The Afghan Defense Ministry went further, alleging strikes on Kabul itself, with explosions reverberating near Abdul Haq Square in District 8 around 9:50 PM local time. Kabul condemned the "violation of sovereign territory" in the strongest terms, vowing to defend its airspace and warning of repercussions for the Pakistani military.
Pakistan has yet to officially respond, but the context is fraught. These alleged airstrikes are part of a pattern of cross-border operations targeting Tehreek-i-Taliban Pakistan (TTP) hideouts, with Islamabad repeatedly urging Kabul to curb militants using Afghan soil for attacks. Reports suggest the strikes may have killed two senior TTP figures, with unconfirmed whispers of a hit on TTP chief Noor Wali Mehsud—though a voice note purportedly from him claims he's alive. The timing is particularly incendiary: It coincides with Afghan Foreign Minister Amir Khan Muttaqi's landmark visit to India, where New Delhi elevated its Kabul mission to a full embassy. Analysts like Pearl Pandya from a leading think tank note that such escalations could stoke Islamabad's fears of an India-Afghanistan axis destabilizing its borders. For the PSX, this border brinkmanship is a classic risk multiplier, often triggering knee-jerk sell-offs in defense-sensitive sectors.
Amid these headwinds, domestic economic indicators offered a glimmer of resilience—albeit a flickering one. Weekly inflation, as measured by the Sensitive Price Indicator (SPI), edged higher for the second straight week, rising 0.17% to push the annual rate to 3.34%. The Federal Bureau of Statistics highlighted spikes in essentials: chicken up 8.92%, eggs 2.25%, onions 7.47%, and flour 5.74%. For low-income households earning up to Rs17,732 monthly, the burden is acute, with inflation at 4.14%. This uptick, from 3% in August to 5.60% in September, tempers hopes for aggressive rate cuts by the State Bank of Pakistan, potentially prolonging tight monetary conditions.
On a brighter note, the auto sector revved into high gear. September 2025 car sales surged 20% month-over-month and a whopping 67% year-over-year to 17,174 units, per the Pakistan Automotive Manufacturers Association (PAMA). Cumulative Q1 FY26 figures hit 42,267 units, up 53% YoY. Suzuki's Alto dominated with 11,238 units sold, while Toyota's Corolla lineup churned out 7,570 units in the quarter. Experts attribute this boom to easing interest rates—from a peak 22% to 13%—unleashing pent-up demand and bolstering consumer confidence. As industry veteran Mashood Ali Khan points out, the sector is inching toward its 200,000-250,000 annual benchmark after a dismal 150,000 units in FY25. This resilience in autos could spill over to ancillary industries, providing a counterweight to inflationary pressures.
Looking ahead, technical indicators paint a cautious picture. Near-term support is clustered in the 160,000–162,000 zone, with resistance looming at 167,000—a pivotal battleground for sentiment. Chart patterns suggest a potential DT Bear Flag breakdown, but a sustained hold above 164,000 could reignite bullish momentum toward 171,500. Investors should monitor upcoming CPI data, SBP policy signals, and any de-escalation in Afghan-Pakistan frictions. The K-Electric deal, if it clears regulatory hurdles, could catalyze a power sector rebound.
In the grand tapestry of Pakistan's markets, Friday's dip is but one thread. The PSX's year-to-date 90% ascent speaks to underlying strengths: IMF-backed reforms, remittance surges, and a burgeoning middle class. Yet, as volatility underscores, sustainability hinges on addressing inflation's creep and geopolitical ghosts. For traders, it's a call to diversify; for policymakers, a nudge toward stability. As the index eyes next week's open, one thing is clear: In Pakistan's bull run, corrections are not endpoints—they're pivots to the next climb.
