The stock market built on the previous week's gains propelled by optimism on Monday over trade negotiations, improving economic indicators and investor rotation into equities.

“Tariff deal and continued optimism is fuelling the rally. Technically, we’ve breached multiple new highs. Earning season is also around the corner, so all this is fuelling the rally at the moment,” said Ahfaz Mustafa, CEO of Ismail Iqbal Securities.

The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index settled at 133,370.14 points, up 1,421.08 points, or 1.08%, from the previous close of 131,949.06.

During the session, the index climbed to an intraday high of 133,862.01, gaining 1,912.95 points, or 1.45%. The day’s low stood at 132,467.12, still up 518.06 points, or 0.39%.

Investor sentiment remains buoyant amid falling inflation, strengthening foreign exchange reserves, and renewed capital inflows. Analysts anticipate the positive momentum will continue, supported by a shift in investment from fixed income to equities due to higher taxation on alternative assets and lower yields.

The PSX ended FY25 as the region’s best-performing market, delivering a 60% total return. That momentum has carried into FY26, lifting the KSE-100 Index into uncharted territory. Average daily traded volumes (ADTV) surged by 31% WoW, indicating heightened investor participation.

The rally has been underpinned by macroeconomic confidence. Pakistan secured $3.4 billion in Chinese rollover and refinancing, alongside another $1.5 billion from Middle Eastern lenders and multilateral partners.

The rally has been underpinned by macroeconomic confidence. Pakistan secured $3.4 billion in Chinese rollover and refinancing, alongside another $1.5 billion from Middle Eastern lenders and multilateral partners.

The State Bank of Pakistan’s (SBP) reserves stood at $14.51 billion as of June 30.

Inflation data reinforced bullish sentiment. The Consumer Price Index (CPI) for June slowed to 3.2% YoY, bringing FY25’s average inflation to 4.5%, a steep fall from 23.4% in FY24. This opens room for potential interest rate cuts, enhancing the investment case for equities.