The Pakistan Stock Exchange (PSX) saw a robust recovery on Friday, clawing back nearly 4,000 points after suffering its largest-ever single-day loss a day earlier, which wiped out an estimated Rs820 billion in investor equity. Thursday’s plunge was triggered by Indian drone and missile strikes on major Pakistani cities, escalating geopolitical tensions and rattling financial markets.
By mid-morning on Friday, the benchmark KSE-100 index had risen 799.65 points, or 0.77%, to reach 104,326.46 from the previous close of 103,526.81. By the end of the trading session, the index had surged 3,647.82 points, or 3.52%, closing at 107,174.63.
What Drove the Recovery?
Mohammed Sohail, CEO of Topline Securities, noted that after Thursday’s sharp 6% decline, the market had bounced back strongly. “So far, the absence of any further major escalation has helped restore investor confidence,” he said.
Yousuf M. Farooq, director of research at Chase Securities, explained that despite ongoing volatility, the PSX opened higher on Friday as investors increasingly believed that a full-scale war with India was unlikely. “Some investors have started accumulating stocks at highly attractive valuations following last week’s sharp pullback,” he said. Technical analysts also flagged that the market had entered “oversold territory,” making it ripe for a rebound.
Reflecting on Thursday’s sharp losses, Farooq attributed the crash mainly to individuals unwinding leveraged positions and mutual funds facing redemptions. “Such corrections and short-term swings are a natural part of equity markets,” he noted, advising long-term investors to stay disciplined and build their portfolios gradually during uncertain times.
Focus Shifts to IMF and Economic Outlook
Investor optimism was also buoyed by the anticipation of a favorable outcome from the International Monetary Fund (IMF) Executive Board meeting scheduled for Friday. Sana Tawfik, head of research at Arif Habib Limited, emphasized that the expected approval of Pakistan’s next loan tranche was a key factor driving the market rebound. “Most likely, the Executive Board will approve the tranche today,” she said.
The IMF meeting was set to approve the immediate disbursement of about $1 billion under the Extended Fund Facility (EFF) and consider an additional $1.3 billion through the Resilience and Sustainability Facility (RSF). Tawfik highlighted that Thursday’s steep market dip had opened up “attractive valuations,” creating a window of opportunity for investors. She also noted that fears of a major military escalation had eased, given the lack of further aggressive developments.
Awais Ashraf, director of research at AKD Securities, added that the panic triggered by the Indian drone attacks was now subsiding. “The Pakistan Armed Forces’ demonstrated ability to intercept and neutralize threats has reassured investors,” he said, calling the recent market correction a valuable chance for portfolio building at more favorable prices.
Backdrop of Escalating Tensions
The PSX had shed Rs1.3 trillion in market capitalization over the past three trading sessions as geopolitical tensions escalated into a military standoff. Early Wednesday, India launched missile strikes on three Pakistani cities, killing over 31 civilians. In response, Pakistan’s armed forces downed five Indian fighter jets, intensifying the regional conflict.
On Thursday, ISPR Director General Lt Gen Ahmed Sharif Chaudhry announced that Pakistani forces had intercepted 25 Indian drones overnight. While most were successfully neutralized, one drone managed to partially strike a military target, injuring four army personnel.
Outlook
Despite the severe geopolitical backdrop, Friday’s market rebound suggests that investors remain cautiously optimistic, driven by confidence in Pakistan’s defensive capabilities and the expected IMF support. Market watchers will continue to monitor political and military developments closely, as well as the economic impact of the evolving situation.
