Islamabad, Nov 17: PSX Predicted to Reach 127,000 Points by December 2025. The Pakistan Stock Market (PSX), boosted by stability of the economy and consolidation of its fiscal policy, expects to reach 112700 by December of this year and 127000 by December of 2025 at a 37% return inclusive of a 10% dividend yield.
Topline Securities report anticipates re-rating in PE on account of better macro sentiment & declining bond yields, which is making more liquidity available in equities, to that historic forward PE of 7 x during the current IMF program. It also estimated the market forward 2026 PE to be 5.75 and for the current level of 4.6 as of December 2025.
During 2025, key drivers for the market would be:
a.The IMF review has been passed and the budget of FY26 has also been passed this required standard of the IMF.
b.This followed by an upgrade of credit rating in Pakistan that was followed by the entry of Eurobonds and Sukuks.
c.New government of USA and Pakistan’s political ties
d.More specifically to: privatized any loss making SOEMinnesota i.e. PIAA, DISCOs in addition to materializing the Reko Diq deal.
Due to declined returns on the fixed-income instruments, the mutual funds have continued to be net net buyers of US$ 138 million in the last 2 months in the equity market. This switch from bonds to equity will probably go on as 1 year Sukuk and T-bill is now at 10.99 percent and 13.1 percent which is significantly lower than the yields that a year ago.
On the economic side, the external indicators are gradually walking up due to try desire control of import growth coupled with high activity on inward foreign workers remittance. It forecasts that the average inflation, however, will settle at around 7-8 percent in FY25 following the 23.4 percent in FY24.
This measure is five percentage points lower than the previous quarter, mainly due to food prices and negative fuel cost drop. Therefore, the report expects the policy rate to average 11-12 percent by December 2025 from 15 percent currently, and a high of 22 percent in June 2024. Based on the above growth estimate, the sector may grow with a moderate GDP of 2.5-3.0 percent in FY25 with the agriculture growth rate of only 1.0 percent.
Top Sectors
With decreasing interest rates, lowering inflation, and a stable currency in the future, the eating out stocks, the consumer discretionary & staples as well as the Pharma stocks will demonstrate an improvement in both their top line margins as well as volume.
In addition we expect the valuation of E&Ps to gradually rise to its mean of 7-8x from the current 4-5x (OGDC and mainly PPL) following better recovery ratios in E&Ps after the gas price hikes. Consequently, companies categorized as a higher valuation gap or discount to the SoTP value also return to their valuations/multiples within the historic range.
With regard to the above mentioned theme the recommendations for investment portfolios from our universe are OGDC, PPL, MEBL, FFC, LUCK, HBL, SYS, PSO, SAZEW, AIRLINK, and NML. However in Alpha stocks the report selects COLG, PKGS, SEARL, AGP, MUREB and AICL as the best stocks to invest on.
