In 2025, Pakistan’s stock market emerged as one of the strongest-performing markets in the world, rebounding from years of volatility, economic uncertainty, and geopolitical pressure.
The Karachi Stock Exchange (KSE-100 index), often seen as a barometer of investor sentiment and economic health, has experienced a significant upward surge, powered by improved macroeconomic indicators, policy reforms, rising investor confidence, and a global shift in sentiment toward emerging markets. What makes this rally noteworthy is not just its scale, but its substance; it is not a speculative bubble but a reflection of deeper structural changes taking place across Pakistan’s financial and economic landscape.
As of July 2025, the KSE-100 index has crossed the 130,000 mark, registering an impressive year-on-year gain of over 60%. This makes Pakistan one of the top-performing stock markets globally over the past fiscal year, outperforming several regional and global benchmarks. In terms of USD returns, it ranked eighth worldwide in FY25.
More significantly, over two years, the Pakistani stock market has outpaced most emerging and frontier markets, delivering returns that have drawn attention from global investors, analysts, and fund managers.
Several key drivers have contributed to this phenomenal performance. First and foremost is macroeconomic stabilization. After grappling with one of the worst inflationary spikes in its history, reaching as high as 38% in May 2023, Pakistan has successfully brought inflation under control. By May 2025, headline inflation had fallen to just 3.5%, supported by tighter monetary policy, exchange rate stability, and improved food supply management.
The State Bank of Pakistan, which had earlier kept interest rates at a record 22% to combat inflation, has gradually eased rates in recent months, bringing the policy rate down to 11%. This shift has made borrowing cheaper, improved corporate margins, and made equities more attractive than fixed-income instruments.
