Pakistan equities emerged as the second-best performing asset class after gold in CY25, with the KSE-100 Index delivering a robust 51% return following three consecutive years of strong gains.
However, Performance during the year was heavily concentrated in 2HCY25. The market returned was subdued in 1HCY25 amid elevated geopolitical tensions (India–Pakistan and Israel–Iran), while 2HCY25 delivered a sharp 39% rally as macro visibility strengthened.
According to analysts, this gain of 51% is lower than the last 3-year average gain of 62% but much higher than the last 20-year average return of 20.8% – thanks to the sharp economic recovery. Stock Market Continues Momentum
During 2025, Sherman Research analysts said that they saw a decline in interest rates by 2.5ppts, Current Account Deficit (CAD) lower than the historic average, Reserves reaching the highest level in last 45 months while import cover improved to 3.3x, the highest in 51 months – thanks to Pakistan’s effective fiscal and monetary policies which remained aligned with IMF’s stabilization measures.
In comparison, gold outperformed equities, benefitting from global risk aversion and central bank buying, reaffirming its role as a hedge in uncertain times. Property returns remained relatively subdued, constrained by elevated construction costs, tighter documentation requirements, and slower transaction activity despite easing interest rates.
Pakistan Among the Top Performing Market in the region
Pakistan’s performance remained insulated from external shocks despite heightened global issues, including the Iran-Israel conflict and border issues with India and Afghanistan – thanks to better Foreign diplomacy with key Western powers. Thus, Pakistan absorbed all these shocks and outperformed other regional markets as defined by MSCI.
Market Posted Record Liquidity in CY25
PSX recorded the highest average daily volume both in-terms of volume (797mn shares) and value of Rs36bn during CY25.
In the local market, mutual funds (US$297mn) and individuals (US247mn) remained the biggest net buyers in the Pakistan equity market, with the largest net sellers being banks (US$149mn) and Insurance (US$145mn).
Foreigners remained net sellers of US$364mn in CY25. Banks and Cements led the rally in CY25. Sectoral performance in CY25 was skewed toward financials and domestic cyclicals, led by Commercial Banks (+88%) and Cement (+85%).
Banking stocks benefitted from strong earnings momentum and improving asset quality, with the sector’s Capital Adequacy Ratio (CAR) at a robust 21.4%, well above the CY17–18 average of 15.75%. Cement outperformance was driven by strong domestic demand, higher capacity utilization, and superior cash generation, with industry EBITDA margins reaching an 8-year high of 50% in FY25.
Other cyclical sectors delivered selective gains
Textile Weaving (+41%) benefited from improving export dynamics, supported by Pakistan securing the lowest US tariffs in the region, with the US remaining the country’s largest export destination.
Fertilizer (+29%) posted moderate returns amid subdued farm economics following floods, while Automobile Assemblers (+16%) saw a gradual recovery as rate cuts supported volumes, though rising competition capped upside. In contrast, Oil & Gas E&Ps (+12%), OMCs (+3%), and Refineries (0%) underperformed due to regulated pricing, delayed receivables, and persistent structural and policy headwinds.
