The Pakistan Stock Exchange (PSX) witnessed a historic rally on Thursday, shattering multiple records, including a 19-year high in trading volume.

For the first time in its history, the PSX crossed the 108,000-point milestone, with the benchmark KSE-100 Index surging by 3,134 points in a single day. The index closed at a record-breaking 108,238 points, marking the third-largest rally in the stock market’s history.

The market also recorded an unprecedented trade volume of 1.65 billion shares, valued at Rs63.15 billion. In an extraordinary trading session, the market saw an increase of more than 3,200 points in a day, crossing three key thresholds -- 106,000, 107,000, and 108,000 points -- showcasing robust investor confidence. 

According to stock analysts, heavy investments by mutual funds played a significant role in driving the rally. Brokers also anticipate a further 2% to 2.5% reduction in interest rates on December 16, which could sustain the market's bullish trend.

Positive economic indicators

The latest rally is being attributed to a series of positive economic indicators, including a sharp decline in inflation and improving macroeconomic fundamentals. In November, Pakistan's annual inflation rate fell to 4.9%, the lowest level since 2017, providing further assurance to investors about the country's economic stability.

Analysts have pointed to the improving trade deficit, which narrowed by 19% year-on-year to $1.59 billion, further strengthening expectations of a current account surplus and fostering market confidence.

The KSE-100 Index’s ascent marks a continuation of the bullish trend that began earlier in the week, when the PSX crossed the significant 100,000-point threshold. Investors have expressed increasing confidence in the government’s economic policies, particularly following the recent reductions in interest rates by the State Bank of Pakistan, with the anticipation of further cuts in the upcoming monetary policy meeting scheduled for December 16.

Sectoral performance boosts market sentiment

The surge in the KSE-100 Index also coincides with positive trends in key sectors such as cement and petroleum, both of which have seen improving sales in recent months.

Analysts have noted that growing consumer demand and the rising sales in these sectors are contributing to the broader economic recovery. Cement sales, in particular, have shown signs of growth, while petroleum sales continue to rise steadily, signaling improving industrial activity and consumer confidence.

In total, 469 shares were traded on Thursday, with 321 companies posting gains, 133 seeing losses, and 15 remaining unchanged. The bullish trend is reflected in the continued increase in market trading activity, with the ready market reaching a trading value of 57 billion rupees ($203 million) earlier this week, the highest in 18 years, according to Topline Securities Ltd.