KSE-100 Index Expected to Hit 203,000 by December 2026: Report

Pakistan’s benchmark KSE-100 Index is projected to reach the 203,000 level by December 2026, implying a total return of around 26%, including dividends, as continued macroeconomic reforms and improving liquidity conditions support market sentiment. According to a report by Topline Research, the target is based on a forward price-to-earnings ratio of 7.6 times for 2027, up from the current 6.8 times, supported by earnings growth of 7%. The brokerage expects the market’s valuation to further re-rate to 8.0 times by mid-2027, similar to the valuation range seen during FY12-FY15 when economic conditions were broadly comparable. Market momentum in 2026 is expected to be supported by steps such as delaying LNG payment pressures, stopping new circular debt build-up in power and gas, and clearing old dues in the gas sector. Progress on PIA’s privatization, possible Eurobond/Sukuk issuances to improve Pakistan’s credit profile, and clarity on the new NFC award are also seen as key positive triggers, said the report. Progress on Reko Diq and possible relief measures in the Budget FY27 for exporters are also highlighted as market-supportive developments. The report adds that local investors are likely to continue shifting funds from low-yield fixed-income instruments toward equities, especially as traditional asset classes such as foreign currency, gold, and real estate remain restricted or less attractive. Pakistan’s market cap to M2 ratio currently stands at 47%, below the historical average of 53% seen in FY12-FY15, suggesting room for further equity market expansion. Total reported leverage in the market remains manageable despite rising margin financing, with liquidity conditions viewed as supportive. On the macroeconomic side, GDP growth is projected at 3% to 3.5% in FY26 and 3.75% to 4.25% in FY27, aided by expected recovery in agriculture. Local investor polls indicate the majority expect the index to trade between 160,000 and 200,000 in 2026, though 25% believe it could close above 200,000. Preferred sectors for 2026 include cement, exploration and production (E&Ps), and oil marketing companies (OMCs), while investors remain underweight in textiles, power generation and steel. Topline’s preferred stocks for 2026 include OGDC, PPL, MEBL, HBL, FFC, ENGROH, LUCK, MLCF, SYS, SAZEW and PAEL, with GLAXO, HINOON, ATLH, GHNI, PTC and PKGS listed as alpha opportunities.