PSX in September

October 02, 2026 (MLN): The KSE-100 Index closed September 2026 on a weak note, as persistent geopolitical uncertainty and volatile oil prices kept investors on the defensive, and a heavy unwind in banking stocks turned a cautious month into the index’s steepest monthly decline since March.

The benchmark index opened the month around the 176,976 mark, its August 2026 close, and slipped through the four weeks to settle at 169,969 points, shedding 7,006 points, or 3.96%, on a month-on-month basis. In doing so, September erased August’s modest 882-point gain nearly eight times over, and pushed the index back below the 170,000 level.

Yet the sell-off did little to cool the public's appetite for equities. PSX added 25,281 new investors in September, the highest number for any single month, taking its total investor base to 656,218, according to figures Khurram Schehzad shared on X. He said the investor base has more than doubled since March 2024, with Gen-Z making up most of the new entrants. 

On a year-on-year basis, measured against its September 2025 close of 165,494 points, the KSE-100 is still up 4,476 points, or 2.70%. That figure, however, marks a sharp compression from the 19.1% YoY gain recorded at the end of August and 26.3% at the end of July. 

Market Cap

The KSE-100’s market capitalisation contracted in tandem with the index, falling to PKR 4.780 trillion at the end of September 2026 from PKR 4.995 trillion in August, a month-on-month decline of roughly PKR 215.1 billion, or 4.31%. 

On a year-on-year basis, against PKR 4.897 trillion recorded in September 2025, market capitalisation is now down roughly PKR 117.2 billion, or 2.39%, even though the index itself is 2.70% higher over the same period.

In US dollar terms, the KSE-100’s market capitalisation stood at approximately $17.25 billion as of September 2026, down from $1 billion in August, a month-on-month decline of about $752.9 million, or 4.18%. The dollar-denominated decline was marginally softer than the rupee one, as the PKR firmed slightly against the greenback during the month, from 277.47 to 277.11.

Compared with September 2025, when dollar-denominated market capitalisation stood at roughly $17.41 billion, the current level represents a year-on-year decline of about $159.0 million, or 0.91%. The rupee’s 1.5% appreciation over the twelve months, from PKR 281.32/USD to PKR 277.11/USD, softened the blow for dollar-based holders compared with the 2.39% fall in rupee terms.

Adjusting for currency movement, the KSE-100 delivered a dollar-denominated return of -3.83% in September 2026, a fraction better than the PKR-based return of -3.96%, since the rupee appreciated by a marginal 0.13% over the month. In other words, currency stability meant dollar-based investors absorbed almost the full extent of the local-currency decline, with only negligible cushioning from the exchange rate.

September was the index’s weakest USD-based reading since March’s -11.4%, and the second negative month out of the last three after July’s -2.2% and August’s barely positive 0.62%. The pattern underlines how far momentum has cooled since the strong run of April (9.7%), May (6.8%) and June (3.8%).

On a year-on-year basis, the dollar-denominated return over the twelve months to September 2026 works out to approximately 4.26%, outpacing the local-currency return of 2.70% on the back of the rupee’s steady appreciation.

Economic Backdrop

September’s sell-off is all the more striking because the macro data released during the month were, on balance, constructive. The external account continued to improve. The current account deficit shrank to $98 million in August from $445 million in July and $324 million in August 2025, bringing the 2MFY27 deficit down to $543 million from $853 million in the same period last year.

Workers’ remittances rose 17% YoY to $3.7 billion in August, taking the 2MFY27 total to $7.3 billion, up 15%, while net FDI rose 24% YoY to $494 million in the first two months of the fiscal year.

The reserve position strengthened further. SBP’s reserves climbed to a record $21.4 billion, lifting import cover to 3.03 months, the highest since August 2020, while total liquid reserves reached $26.8 billion, the highest since September 2021. The rupee held broadly stable through the month, trading within a narrow PKR 277.29–277.63/USD band.

Not every indicator pointed the same way. The trade deficit widened 15.1% YoY to $3.3 billion in August, as exports fell 5.2% to $2.5 billion while imports rose 10.6% to $5.8 billion, and the 2MFY27 trade gap is now 20.3% wider at $7.3 billion.

Inflation remains the market’s sore point. Headline CPI for September, released on 1 October, came in at 10.3% YoY, easing from 11.1% in August but well above the 5.8% of September 2025. Price pressures beneath the surface were mixed. Wholesale inflation accelerated to 13.3% YoY and trimmed-mean core measures firmed to 9.4%, even as NFNE core softened.

Against that backdrop, the State Bank kept the policy rate unchanged at 11.5% at its 14 September review, and yields in the latest PIB auction rose by 20–75 basis points across the 3-, 5- and 10-year tenors, with the government raising PKR 178.6 billion against a PKR 250 billion target.