PSX, PKR to enjoy a sharp rebound on ceasefire, IMF approval

May 11, 2025 (MLN): The Pakistan Stock Exchange (PSX) and the Pakistani rupee (PKR) will likely see a rally tomorrow amidst strengthening investors' sentiments on the ceasefire agreement between Pakistan and India and the International Monetary Fund’s (IMF) approval of $2.4 billion in funding.

The truce, easing regional tensions, has coincided with positive developments on the economic front. The IMF Executive Board approved the immediate disbursement of a $1bn tranche under the Extended Fund Facility (EFF), while also greenlighting an additional $1.4bn for climate resilience support.

Analysts fraternity is hopeful that the KSE-100 Index to have a rally of 3,000 to 4,500 points, equivalent to a 3.5% to 4.5% gain, right from the opening bell, with a majority of stocks expected to trade in the green.

Not to forget that due to border tensions, the local bourse could not celebrate the recent cut of 100 bps by MPC. 

It is important to note that the KSE-100 Index, which had hit a peak of 118,430.35 points on April 22, declined sharply to 102,635.25 points by May 9, 2025, witnessing a loss of over 15,800 points, or roughly 13.33%.

Similarly, the domestic currency, which has weakened significantly over the past fortnight by 1%, is also projected to rebound on the back of renewed IMF inflows, strong remittances, averaging over $3 billion for the past five months, and renewed market confidence.

The overall situation looks favourable for the short term, but there is uncertainty looming as India is yet to reinstate the Indus Waters Treaty. 

Historical patterns suggest that markets tend to recover after initial reactions to geopolitical flare-ups. Past episodes, such as the 2001-02 military standoff and the 2019 Balakot crisis, witnessed steep market declines followed by a swift recovery once the immediate threat of conflict subsided.

This time, the confluence of multiple positive triggers, ceasefire, IMF funding, monetary easing, and corporate resilience, is likely to fuel a historic single-day rally in the stock market. 

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