PSX recovers from policy rate-driven sell-off

The benchmark index posted a gain of 663.59 points, or 0.41%, to close at 163,038.47. The market remained under pressure earlier in the session, with the index touching the intra-day low of 161,250.07. However, upward momentum in the latter half took it to the high of 163,477.09.

In the afternoon, the SBP raised its policy rate by 50 basis points to 12%, a move that would increase borrowing costs for businesses. Meanwhile, international oil prices fell after surging last week but remained near six-month highs amid expectations of easing hostilities between the US and Iran.

Persistent attacks on key oil producer Saudi Arabia, however, kept investors wary and continued to cloud the outlook for global energy supplies. Ahmed Sheraz, the KSE-100 index closed up 664 points (+0.41%), recovering from the intra-day low of 161,250 to the high of 163,477.

Trading remained volatile amid earlier concerns over a potential 100-basis-point rate hike, while buying interest emerged later, particularly in cement, which helped the index recover to close in positive territory. Sector-wise, performance was mixed, where cement firms, investment banks and oil & gas companies contributed positively.

UBL, Engro Holdings and Lucky Cement supported the upside, while Meezan Bank closed in the red. Meanwhile, Brent crude hovering near $115 per barrel continued to fuel inflationary concerns. Pakistan, alongside Saudi Arabia and Turkey, was pursuing mediation efforts with Iran as a delegation visited Tehran on Monday.

Despite the positive close, investor sentiment may remain cautious amid elevated oil prices, regional mediation efforts, Israeli elections and the upcoming US midterm polls, Sheraz said.

"The market traded in both directions amid cautious investor sentiment ahead of the SBP's MPC announcement, with market participants largely anticipating a 50-basis-point hike in the policy rate," Arif Habib Limited Deputy Head of Trading Ali Najib commented. Later, the central bank raised the policy rate by 50 basis points to 12%, in line with market expectations.

The decision reflected heightened geopolitical risks stemming from the US-Iran conflict, which drove international oil and commodity prices higher, raising concerns over domestic inflationary pressures. On the geopolitical front, Pakistan's Chief of Defence Forces arrived in Tehran for high-level talks involving Iran, Pakistan, Saudi Arabia and Turkiye amid escalating regional tensions following Houthi attacks on Saudi Arabia.

UBL, Engro Holdings, Lucky Cement and OGDC contributed 719 points to the index, while Meezan Bank, Engro Fertilisers, Fauji Fertiliser, Pakistan Services and HBL erased 367 points.