The Pakistan Stock Exchange (PSX) witnessed a strong surge on Monday as easing tensions between Pakistan and India spurred investor optimism, pushing the benchmark KSE-100 index up by over 9%.

The benchmark KSE-100 index surged to 117,104.11 points after a surge of 9,928 points during intra-day trade — the highest day-on-day increase in points on an intra-day basis — up from the previous close of 107,174.63 points.

The positive momentum was driven by two major developments: the ceasefire agreement between Pakistan and India, and the International Monetary Fund's (IMF) approval of a critical loan tranche over the weekend.

Market participants responded with strong buying activity amid improved geopolitical and economic outlooks. Following the rapid surge, trading on the exchange was suspended for an hour — a circuit breaker to control excessive volatility — but has now resumed.

In a note, Arif Habib Limited noted that the most significant catalyst is the ceasefire agreement between India and Pakistan — a major diplomatic achievement that sharply lowers geopolitical risk in the region.

The announcement comes after weeks of tension following the Pahalgam attack, which had triggered aggressive selloffs and fueled widespread investor concerns.

Adding further momentum is US President Donald Trump's recent statement pledging support for resolving the Kashmir issue and encouraging enhanced trade relations between India and Pakistan.

"To highlight, Pakistan’s exports to the US reached $4bn in FY25TD, compared to imports of $1.5bn, delivering a sizable trade surplus of $2.5bn," the brokerage said.

Amid easing regional tensions, Pakistan has secured a crucial financial lifeline with the IMF’s approval of a $1bn disbursement under the Extended Fund Facility (EFF) and a $1.4bn Resilience and Sustainability Facility (RSF).

The IMF’s dual approval not only ensures immediate external financing support but also signals international endorsement of Pakistan’s reform agenda, further strengthening investor confidence amid improving macroeconomic stability.

These developments coincide with the State Bank of Pakistan's recent decision to cut the policy rate by 100bps to 11% — a move that reflects easing inflationary pressure and is expected to boost equity valuations, particularly in leveraged and cyclical sectors.

Together, the ceasefire, IMF support, monetary easing, and the positive shift in trade relations with the US form a powerful trifecta of bullish triggers just as the market attempts to recover from its recent sharp correction that began on April 22, following the Pahalgam attack and subsequent regional tensions.

Since April 22 the KSE-100 index had declined by 12.6% (May 8), with panic-driven selloffs culminating in the largest ever intraday point drop in market history last week, although a sharp 3.5% rebound on May 9 hinted at a sentiment shift already underway.

This is a developing story and is being updated with more details.