'Pakistan stocks profitable to trade around IMF bailout cycles': Christopher Wood

Investment 2026: Pakistan’s equity markets have surged into the spotlight, combining macro triggers, geopolitical developments, and IMF-linked cycles to deliver outsized gains. The latest rally was sparked by a dramatic easing in West Asia tensions, reinforcing the tactical appeal of Karachi Stock Exchange (KSE-100)-listed stocks, as highlighted by Christopher Wood, global head of equity strategy at Jefferies.

On April 8, Pakistan’s benchmark KSE-100 index recorded a historic intraday surge, jumping over 12,000 points after reports of a US-Iran ceasefire lifted investor sentiment. According to Dawn, the index climbed 12,362.38 points, or 8.15%, to touch 164,035.83 in early trade. The sharp spike triggered a temporary trading halt, in line with exchange rules aimed at managing extreme volatility. This marked the largest single-day gain in absolute terms for the index.

The rally followed confirmation of a two-week ceasefire between the United States and Iran. Under the agreement, Washington paused planned military action, while Tehran committed to reopening the Strait of Hormuz -- a critical global oil transit route. US President Donald Trump said strikes on Iran would be suspended for two weeks, subject to secure reopening of the strait, while Iran’s Foreign Minister Abbas Araghchi assured safe passage through the waterway.

Against this backdrop, Wood reiterated that Pakistani equities tend to perform strongly around IMF bailout periods. Since the latest IMF programme in September 2024, the MSCI Pakistan Index has surged 84 per cent in US dollar terms, outperforming MSCI India by 124 per cent over the same period.

"Still, to keep matters in perspective, it is only fair to point out that since the start of this century India has outperformed Pakistan by 653 per cent in US dollar terms," Wood said.

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Market performance reflects this renewed momentum. The KSE-100 index is up nearly 13 per cent so far in FY27, compared with a 6.4 per cent gain in the BSE Sensex. Over the past year, the KSE-100 has risen करीब 44 per cent, far outpacing the Sensex’s 8 per cent increase.

"The Pakistan-brokered ceasefire should be viewed for now as another version of TACO, the belief in which explains in large part why financial markets have not sold off more in the face of the dramatic Middle East news flow of the past six weeks," Wood wrote.

Wood further added that the ceasefire is positive for energy-importing countries like India, even if Pakistan’s elevated geopolitical profile may be uncomfortable for New Delhi.

"While Pakistan has been a bit of a macro-economic disaster for most of its existence since its independence in 1947, characterised by a lack of exports, recurring current account crises and numerous IMF programs, it has genuine geopolitical significance because of its nuclear status and its large military," Wood added.

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On India, Wood maintains a ‘marginally overweight’ stance but flags risks including any renewed escalation in Iran and a potential slowdown in domestic mutual fund inflows. He noted that MSCI India has underperformed broader emerging market indices by just 1.9 per cent in US dollar terms since early March, after sharper underperformance earlier in CY26.

Valuations have moderated, with the Nifty’s one-year forward PE at 18.3x, up from 17x at the end of March and closer to its pre-Covid average of 16.8x.

“It is further the case that the de-rating in recent months, driven by aggressive foreign selling rather than any particularly negative news flow, means that India’s traditional overvaluation has reduced significantly,” Wood said.

The sharp rebound in Pakistani equities follows weeks of volatility driven by Middle East tensions, underlining how quickly sentiment can shift in frontier markets when macro and geopolitical catalysts align.