Over the last two and a half years, the momentum in the Pakistan Stock Exchange (PSX) has largely been driven by mutual funds, as their unit holders gradually shifted from debt instruments to equities amid a declining interest rate environment. This period of sustained inflows and market support effectively came to an end in January, when policy rates were held steady instead of being reduced.
Looking ahead, with international oil prices on the rise, expectations of further policy rate cuts are likely to be limited, if not entirely exhausted. This signals the beginning of the second phase of the market cycle.
While the equity phase remains intact, investors will need to approach the market with greater analytical rigor and refined portfolio structuring to navigate the evolving landscape effectively.