PSX Boom Phases: What’s Driving the Rally
The PSX boom phases explain why the market has surged in recent months. The Pakistan Stock Exchange index now trades near 185,000. As a result, investors are watching the rally with both hope and caution. The benchmark index gained about 67% over the past year. In addition, it rose around 2.5% in the last month alone. Analysts say valuations remain attractive compared with global markets. Many experts point to a price to earnings ratio near 11. Therefore, they believe stocks still look affordable. However, some warn that corporate profits may slow soon.
Early Phase Confidence Drives Growth
In the early PSX boom phases, most investors agree that stocks look undervalued. This shared belief pushes prices higher. As a result, companies see their net worth rise.
Higher net worth encourages firms to invest in machinery and factories. In addition, banks increase lending for working capital. This process boosts real investment and economic activity.
Consequently, the early phase supports production and job creation. It also builds confidence across the business sector.
Middle Phase Bulls and Bears Compete
In the later stage, investor opinions start to differ. Bulls expect prices to rise further. However, bears believe stocks look expensive.
This difference creates market swings. When bulls dominate, prices move up. On the other hand, stronger bearish sentiment causes short corrections. Despite these swings, the rally often continues. Bulls keep buying shares, even as doubts grow.
Late Phase Borrowing Fuels the Rally
In the final PSX boom phases, investors borrow more to buy stocks. They pledge their shares as collateral. As a result, leverage in the market increases. Banks continue lending as long as prices rise. Recently, the cash reserve requirement dropped from 5% to 4%. Therefore, banks now have more liquidity to lend. This easier credit can extend the rally. However, it also raises financial risks.
Key Risks Ahead
Analysts closely track inflation trends. The average rate in FY2026 stands near 6%, which meets the central bank’s target. If inflation stays stable, the rally may continue. However, global commodity prices are rising. Oil, gas, and coal costs are moving higher. As a result, corporate profits may face pressure. Experts warn that crude prices above $75 per barrel could shake investor confidence. Therefore, the market may see jitters if profits weaken.
