Bulls stage comeback at PSX, driving market up by over 3,000 points

The capital market experienced a strong rally as political tensions subsided after Pakistan Tehreek-e-Insaf (PTI) decided to call off its protest in Islamabad on Wednesday.

The Pakistan Stock Exchange's (PSX) benchmark KSE-100 Index surged by 3,740.84 points, or 3.96%, reaching 98,315.19 points during the intra-day trade, up from the previous close of 94,574.16 points.

The rally came in response to PTI's announcement to temporarily call off its "do-or-die" protest, which had paralysed the federal capital since November 24.

The suspension followed a crackdown by law enforcement agencies, which dispersed protesters from Islamabad’s Red Zone.

In a press release by its central media cell, PTI stated: "In light of the government's brutality and plans to turn the federal capital into a "slaughterhouse" for unarmed citizens, we are announcing the temporary suspension of our peaceful protest."

The party added that future actions would be announced after consulting Imran Khan.

The easing of political unrest prompted a relief rally as investors, previously wary of prolonged instability, regained confidence and re-entered the market.

Muhammad Saad Ali, Director of Research at Intermarket Securities, attributed the market’s performance to improved investor sentiment: "The market is staging a relief rally today, following the news that the PTI protests may have been quelled by the government. The market has pared back yesterday's big losses almost completely.”

“Banks are supporting the rally too,” he added. “Yesterday's removal of MDR on certain non-individuals' deposits is a big positive for the large conventional banks—likely to support their earnings and payouts in 2025 amid falling interest rates."

The banking sector emerged as the key driver of the rally, benefiting from the State Bank of Pakistan's (SBP) removal of the Minimum Profit Rate (MPR) requirement on deposits from financial institutions, public sector enterprises, and public limited companies.

This decision, announced on Tuesday, has bolstered conventional banks by easing the burden of mandatory deposit reserves and improving profitability.

Previously, commercial banks were required to pay a minimum profit rate on all savings deposits, linked to the SBP repo rate. The removal of this requirement marks a shift in banking policy, aimed at facilitating large depositors and encouraging fair banking practices.

Analysts predict that the removal of the MPR will strengthen earnings and payouts for major banks in 2025, particularly as interest rates decline.

Additionally, the reversal of arbitrarily imposed charges on large accounts with deposits exceeding Rs1 billion has provided further relief to depositors.

The SBP's decision aligns with its efforts to promote transparency and protect the interests of both banks and depositors.

By relaxing these requirements, the central bank aims to create a more balanced and competitive banking environment.

This is a developing story and is being updated with more details.