The capital market soared to new heights on Thursday, with the benchmark KSE-100 Index crossing the 120,500 mark for the first time in history as investor sentiment remained upbeat amid stabilising macroeconomic indicators and policy clarity.

The rally follows gains underpinned by easing geopolitical tensions and expectations of a stable economic roadmap under the International Monetary Fund's (IMF) supervision.

“It’s a continuation of the rally post relief from Indo-Pak war,” said AAH Soomro, an independent investment and economic analyst. “The market overall remains attractive with more investors deploying funds consistently."

"Agreement with IMF on the budget is likely to give impetus to growth sector stocks and continue bull run eventually towards 150,000 in a year,” he added.

The Pakistan Stock Exchange’s (PSX) benchmark index surged to a new historic high of 120,699.17 points, rising 767.72 points, or 0.64%, during the intra-day trading session, up from the previous close of 119,931.45.

The index also marked a low of 119,226.27 points, down 705.18 points, or -0.59%.

Investor confidence was further buoyed this week after Pakistan's nominal GDP crossed the $400 billion mark for the first time, according to provisional estimates approved by the National Accounts Committee (NAC).

The economy’s size has expanded to Rs114.7 trillion ($411 billion) in FY25, up from Rs105.1 trillion ($372 billion) in the previous fiscal year. The NAC also reported GDP growth of 2.68% for the current year, with quarterly revisions showing growth of 1.37% in Q1 and 1.53% in Q2, though still below the government’s initial 3.6% target.

Meanwhile, budget negotiations between the government and the International Monetary Fund (IMF) remain underway. The IMF is pushing for higher taxation on agriculture-related inputs, including an increase in Federal Excise Duty (FED) on fertilisers from 5% to 10% and the introduction of a 5% tax on pesticides.

Prime Minister Shehbaz Sharif is reportedly urging the Fund to reconsider these proposals, citing the strain such measures could place on the farming sector.

The IMF is also advocating for the implementation of Agriculture Income Tax (AIT) starting July 1, 2025, and pushing for broader tax base reforms, including uniform turnover thresholds for income and GST registration.

Preliminary projections suggest AIT could raise Rs40–50 billion in the short term from provincial collections.

The rally follows Wednesday’s strong performance, when the KSE-100 Index closed at 119,931.45, gaining 960.33 points, or 0.81%.