The stock market fell on Tuesday as profit-taking and broader market corrections erased some of the recent gains following the record rally that propelled the market past the 111,000 mark earlier in the year. session, investors having chosen to lock in their profits. .

The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 index closed at 108,896.65, down 1,073.73 points, or -0.98 percent. The session saw an intraday high of 111,759.58 and a low of 107,711.40.

Despite the correction, analysts believe the market maintains its long-term bullish outlook, supported by strong macroeconomic fundamentals and favorable economic indicators.

“The anticipation of a rate cut, falling inflation figures, improving liquidity – particularly purchases from funds – and low bond yields that make stocks an attractive asset class are the main determining factors,” said Sana Tawfik, head of research at Arif Habib Limited.

The rally highlights improving sentiment towards Pakistan’s economic prospects, driven by lower inflation, stronger foreign exchange reserves and increased economic activity. Investors remain encouraged by ongoing reforms and the potential for further monetary easing, paving the way for sustained market momentum in the days to come.

Remittances reached $14.8 billion in the first five months of fiscal 2025, an increase of 33.6 percent year-on-year, according to the State Bank of Pakistan (SBP). November alone saw inflows of $2.9 billion, up 29.1% from the same month last year, although slightly lower than October’s figure.

The main drivers of this growth include a stable rupee, government incentives for banks and exchange houses, and increased emigration. More than a million skilled professionals have left Pakistan over the past three years, significantly increasing official remittances. Furthermore, efforts to curb illicit currency trading and mitigate global inflation have further strengthened this positive trend.

Broader macroeconomic improvements continued to fuel market optimism. Inflation fell to 4.9% in November, its lowest level since April 2018, opening the door to possible monetary easing. Saudi Arabia’s decision to extend a $3 billion deposit for another year and formalized trade deals worth $560 million have boosted foreign exchange reserves and investor confidence.

Economic activity also remains strong, with oil sales hitting a 25-month high of 1.58 million tonnes in November. Additionally, the government’s successful Ijarah Sukuk auction worth Rs 353 billion has added liquidity to the financial system.

“The steady flow of liquidity from mutual funds and individuals, boosted by better returns and favorable tax treatment, has been a factor,” added Samiullah Tariq, head of research at Pak-Kuwait Investment Company.

On Monday, the PSX extended its rally for the ninth consecutive session. The KSE-100 index gained 916.43 points, or 0.84 percent, to close at 109,970.38, with an intraday high of 110,248.98.

The State Bank of Pakistan’s upcoming monetary policy meeting on December 16 is a key event for investors, with expectations of a significant rate cut that could provide additional momentum to the market.