The equity market rose sharply on Wednesday amid strong investor confidence in the newly announced federal budget, with analysts pointing to favourable tax treatment and IMF-aligned fiscal discipline as key drivers of sentiment.

The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index climbed to an intraday high of 124,135.96, gaining 2,111.52 points, or 1.73%, and touched a low of 123,237.99, reflecting a rise of 1,213.55 points, or 0.9%.

Brokers and analysts welcomed the FY2025–26 budget, which kept the capital gains tax (CGT) on equities unchanged at 15%, while increasing taxes on interest income — a move seen as tilting investor preference towards stocks.

“Lower taxes on equity versus fixed income is a major trigger for PSX.

This is just the beginning towards 150,000 in a year,” said independent investment and economic analyst AAH Soomro.

The budget projects Rs19.3 trillion in revenues and Rs25.8 trillion in expenditures, resulting in a federal fiscal deficit of Rs6.5 trillion, or 5.0% of GDP.

The overall national deficit is estimated at Rs5 trillion (3.9% of GDP), requiring provincial governments to generate a Rs1.5 trillion surplus — up from Rs1 trillion in FY25.

Topline Securities noted that if passed without significant changes, the budget could support a re-rating of the market’s price-to-earnings (PE) ratio from 5.2x to 7x, further enhancing the appeal of equities in the coming fiscal year.

The rally follows a modest advance on Tuesday, when the KSE-100 Index rose by 383.44 points, or 0.32%, to close at 122,024.44.

The index hit a high of 122,611.53 and a low of 121,589.90 during that session.