PSX brushes aside SBP’s rate hike amid falling oil prices
KARACHI: The Pakistan Stock Exchange (PSX) staged a strong recovery on Monday, with declining international oil prices providing the key support for investor sentiment as the benchmark KSE-100 Index closed in positive territory despite a 50-basis-point interest rate hike by the State Bank of Pakistan (SBP).
The benchmark index gained 663.59 points, or 0.41 percent, to settle at 163,038.46 points against the previous close of 162,374.87 points, recovering from an early-session sell-off as oil prices eased from recent highs.
The market remained volatile throughout the session, with the KSE-100 Index touching an intraday low of 161,250.06 points before rebounding to a high of 163,477.08 points. The recovery gathered momentum in the afternoon, allowing the benchmark to cross the 163,000-point mark and erase its earlier losses.
PSX trader Javed Khanani told The Karachi Post, the decline in crude oil prices offered relief to investors after a sharp increase in international energy prices had heightened concerns over Pakistan’s import bill, inflation outlook and external account. US crude prices fell by more than 2 per cent during the session as traders assessed geopolitical risks and the potential impact of persistently high prices on global demand.
“For Pakistan, where imported energy is a significant component of the external payment burden, easing oil prices can improve market sentiment by raising hopes of reduced import costs and moderating inflationary pressure, provided the decline is sustained,” he added.
The positive market close came despite the SBP’s decision to raise its policy rate by 50 basis points to 12 per cent, effective October 27. The central bank cited worsening inflation risks associated with geopolitical developments, elevated energy prices and potential second-round effects of supply shocks.
Khanani noted that the immediate relief from lower oil prices outweighed concerns over tighter monetary policy during the closing hours. While higher interest rates generally increase borrowing costs for businesses and can constrain investment, the easing in crude prices offered investors a more favourable signal for the country’s inflation and external-sector outlook.
He said buying in cement, investment companies and oil and gas exploration stocks supported the recovery. Cement stocks contributed approximately 345 points to the index’s gain, followed by investment companies and securities with around 188 points and oil and gas exploration companies with about 180 points.
Trading activity remained substantial, with total ready-market volume reaching approximately 376.02 million shares and traded value standing at Rs16.19 billion. Of the 495 companies traded, 196 advanced, 251 declined and 48 remained unchanged, showing that the benchmark’s recovery was driven by selected heavyweight stocks despite broader market weakness.
The positive close provided some relief after the KSE-100 Index had lost 4,044.84 points, or 2.4 per cent, during the preceding week, extending its losing streak to five consecutive weeks amid rising oil prices and geopolitical uncertainty.
Going forward, investors will closely monitor international crude prices, developments in the Middle East, inflation trends and the impact of the higher policy rate on corporate earnings.
Monday’s session demonstrated that easing oil prices can provide a powerful sentiment boost to equities, enabling the PSX to recover its losses and close higher despite the central bank’s monetary tightening.
Experts say, for Pakistan, lower international oil prices could help moderate the import bill and ease pressure on the external account if the decline proves sustained. They could also reduce some imported inflationary pressures, although the benefits would depend on the scale and duration of the decline, domestic pricing decisions and the wider geopolitical situation.