The Pakistan Stock Exchange (PSX) kicked off the week on a positive note as investor optimism surged, driven by expectations of a potential policy rate cut by the State Bank of Pakistan (SBP) and improving economic indicators.

According to the PSX website, the KSE-100 index gained 1,867.61 points, a positive change of 1.63 per cent, and closed at 116,169.41 points as compared to 114,301.80 points on the last trading day.

A total of 1,470,661,659 shares were traded during the day as compared to 1,118,570,230 shares the previous trading day, whereas the price of shares stood at Rs66.628 billion against Rs59.511 billion on the last trading day.

As many as 477 companies transacted their shares in the stock market, 246 of them recorded gains and 194 sustained losses, whereas the share price of 37 companies remained unchanged.

Market enthusiasm was bolstered by the announcement from the Monetary Policy Committee (MPC), with speculations of a rate cut ranging between 200 to 500 basis points.

Recent data shows that November’s inflation rate dropped to 4.9%, resulting in a positive real interest rate of 10%, which creates ample room for easing monetary policy.

The government’s recent revision of the National Savings Schemes (NSS) profit rates, which saw a 250 basis point reduction in Savings Account returns, is expected to shift funds from savings into equities, further energizing market activity.

Strong foreign inflows have contributed to this bullish sentiment, with remittances rising 29% year-on-year to $2.9 billion in November, helping maintain foreign reserves at $16.6 billion as of December 6, 2024.

Reserves held by the SBP reached $12.051 billion, the highest since March 2022.

Moreover, the Current Account Deficit (CAD) has narrowed significantly, down 79% year-on-year to $217 million during the first two months of FY2025, aided by robust remittance flows and stable export earnings.

Exports are projected to hit $33 billion by the end of FY2025, while remittances are expected to rise to $33.5 billion, supported by government incentives and easing global inflation.

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The banking sector is also showing signs of recovery, with the advance-to-deposit ratio (ADR) increasing to 47.8% in November.

Last week’s Treasury Bill (T-bill) auction raised Rs1.256 trillion, surpassing its target, which has further bolstered liquidity in the market.

Later in the day, the SBP’s Monetary Policy Committee cut the policy rate by 200 bps to 13%.