PSX benchmark index up 3.6%WoW despite unrest in Middle East
Pakistan Stock Exchange (PSX) staged a strong rebound during the week following the ceasefire agreement between Iran and Israel. The benchmark index gained 4,356 points or 3.6%WoW to close at record 124,379 points on Friday, June 27, 2025.
While the week began on a cautious note due to renewed concerns over regional instability following the US attacks on Iranian nuclear facilities, the ceasefire restored investors’ confidence and triggered a sharp recovery from the second trading day onward.
Market participation dropped despite the rally, with average daily traded volume falling to 736 million shares from 822 million shares a week ago, down 10%WoW.
The foreign exchange reserves held by State Bank of Pakistan (SBP) declined sharply by US$2.7 billion to US$9.1 billion as of June 20, 2025, the second-largest weekly fall, mainly due to scheduled external debt repayments.
However, SBP reiterated its June end reserve target of US$14 billion, with US$3.6 billion inflows expected to be reflected in the coming week. Domestic currency remained largely stable at PKR283.7/US$.
The FY26 Federal Budget was approved on Thursday, with minor adjustments to tax laws and rates.
On the inflation front, headline CPI for FY26 is projected to moderate further to 4.4%YoY as compared to 4.5% for FY25, due to a moderate increase in food and housing indices.
Other major news flow during the week included: 1) Pakistan and United States eyeing preferential trade deal in talks, 2) Consumer confidence at highest since 2022, up 25%YoY in 4QCY25, 3) Power generation up 1%YoY in May 2025 on lower tariffs, and 4) RDA inflows were up 14%MoM in May 2025, to US$10.38 billion.
Woollen, Glass & ceramics, and Vanaspati & allied sectors were amongst the top performers, while Modaraba, ETFs, and Sugar & allied industries reported declines.
Major selling was recorded by Foreigners and Individuals with a net sell of US$15.8 million. Mutual funds and Insurance absorbed most of the selling with a net buy of US$16.1 million.
Top performing scrips of the week were: BNWM, GHGL, NATF, HUMNL, and PABC, while laggards included: PSEL, PKGP, PGLC, EPCL, and ISL.
According to AKD Securities, the market is expected to remain positive in the coming weeks, with forward inflation for FY26 projected at 4.4%YoY, indicating substantial room for monetary easing, which would serve as a catalyst for equities.
The KSE-100 index is anticipated to sustain its upward trajectory, primarily driven by strong earnings in Fertilizers, sustained ROEs in Banks, and improving cash flows of E&Ps and OMCs, benefiting from falling interest rates and economic stability.
Top picks of the brokerage house include: OGDC, PPL, PSO, FFC, ENGROH, MEBL, MCB, HBL, FCCL, INDU, and SYS.
Fertilizer offtakes recorded the first improvement during CY25, driven by the onset of the Kharif season. The uptick is attributed to the availability of interest-free loans under the Punjab Kisan Card scheme, as well as preemptive buying amid market speculation over a potential price hike due to the proposed imposition of FED and GST on feed gas.
Urea sales improved by 5%YoY to 418,000 tons during May 2025, although cumulative offtakes remain lower by 8%YoY and 31%YoY in first two months of Kharif season and 5MCY25, respectively.
DAP offtakes increased to 95,000 tons on a low base and a delay in rice cultivation due to Punjab government’s ban on nursery sowing until April 2025.
CAN and NP sales also surged to 83,000 tons and 76,000 tons, respectively.
FFC’s urea sales declined by 28%YoY to 207,000 tons, due to a high base from same period last year when company’s offtakes spiked amid EFERT’s EnVen plant turnaround. Consequently, FFC’s market share normalized to 50% from 72% during the period under review. However, DAP sales increased to 68,000 tons, supported by higher availability of domestically produced DAP. Though FFC’s DAP market share slightly declined to 72% from 76%.
EFERT’s urea sales increased by 86%YoY to 142,000 tons, mainly due to: 1) low base from last year’s plant turnaround, and 2) discount offering during the month. This led to EFERT’s market share recovering to 34% from 19%.
Likewise, company’s DAP offtakes also surged to 13,500 tons on the back of higher product availability, lifting its market share to 14% from 4%.
FATIMA’s urea sales jumped to 54,000 tons, driven by discount offerings amid higher inventory levels. Subsequently, its market share improved to 13% from 4%. Offtakes across the portfolio also witnessed strong growth, with DAP, CAN, and NP sales rising.
Analysts expect inventory levels to ease with continued Kharif season demand and the potential shutdown of RLNG-based plants (Fatimafert and AGL combined)
Urea capacity of 879,000 tons per annum Tons per annum as no subsidy has been allocated in the Federal Budget for FY26.Notably, Urea inventories have climbed to an 7-year high of 1.3 million tons, due to sluggish offtakes driven by weak farm economics amid declining crop prices following the removal of support pricing mechanism.
Company wise, EFERT (43%), FFC (27%), and FATIMA (24%) of the total urea inventory.
AKD Securities maintains an overweight stance on the Fertilizer sector, supported by robust earnings, and strong cash flows translating into attractive dividend yields.