The PSX crossed the 108,000 mark as investors expected a big rate cut.

The capital market crossed the 108,000-point mark on Thursday, fueled by a buying frenzy, as expectations of a significant cut in interest rates at the upcoming State Bank of Pakistan (SBP) monetary policy meeting on December 16 rose, along with a record low. Improving inflation and economic fundamentals.

The benchmark KSE-100 shares index of the Pakistan Stock Exchange (PSX) closed at 108,238.96 points after touching an intraday high of 108,345.98 points, up 3,134.63 points or 2.98%.

“Strong liquidity, stable macro indicators, expected December MPC rate cut, and low political risk are driving the submarket,” said Muhammad Saad Ali, director of research at Intermarket Securities Ltd. Emotions,” he added.

The PSX added another milestone by achieving its highest market activity in nearly 19 years, with a trade value of Rs63 billion ($227 million). This marks the highest activity in the regular market since April 17, 2006, underlining the strength of investor interest and liquidity.

Finance Minister Muhammad Aurangzeb reiterated the government’s commitment to economic stability through structural reforms and a moratorium on the International Monetary Fund (IMF) program.

Addressing a function in Islamabad, Aurangzeb highlighted that the current account deficit has narrowed, inflation has come down to a 70-month low and the country’s economy is showing signs of recovery.

The Ministry of Finance also reported an improvement in financial stability, attributed to ongoing reforms.

As inflation continues to decline, expectations for further monetary easing are rising, signaling a brighter economic outlook.

The SBP has already cut interest rates by 700 basis points (bps) in four consecutive meetings since June, bringing the rate to 15 percent. Experts widely expect another significant decline, with most analysts predicting a decline of at least 200 bps.

A survey conducted by Topline Securities showed that 71% of respondents expected a minimum cut of 200 bps, 63% predicted exactly 200 bps, 30% expected 250 bps. , and 7% expect a big cut.

The case for monetary easing is supported by November’s consumer price index (CPI) inflation, which came in at 4.9 percent, the lowest in 78 months and within the SBP’s target range of 5-7 percent. There is very little.

“This reading keeps inflation well below target, leaving ample room for further rate cuts,” noted Topline Securities.

The decline in inflation is due to food disinflation and adverse adjustment in electricity prices. Analysts have predicted that inflation will remain in the single digits in the coming months, maintaining a favorable environment for monetary easing.

Trade data released by the Pakistan Bureau of Statistics (PBS) further bolstered market sentiment. Pakistan’s trade deficit during the first five months of the current fiscal year (July-November) decreased by 7.39 percent to $8.651 billion from $9.341 billion during the same period last year.

Exports increased by 12.57% to $13.69 billion while imports increased by 3.90% to $22.342 billion. November’s trade deficit narrowed further, narrowing by 18.60 percent year-on-year to $1.589 billion, compared to $1.952 billion in November 2023.

Thursday’s rally follows an impressive session on Wednesday, when the KSE-100 shares index rose 545.26 points, or 0.52 percent, to close at 105,104.33 points after hitting an intraday high of 105,473.56 points.