In FY25, Pakistan’s Islamic equity market sustained strong momentum, with the KMI-30 index advancing ~46.23% by end-June. Macro conditions improved markedly as the $7 billion IMF Extended Fund Facility stayed on track, with disbursements exceeding $2 billion and the second review unlocking ~$1 billion in May. Inflation eased to ~3.2% by June, prompting the SBP to reduce the policy rate from 22% to 11%, creating some of the strongest positive real rates in recent history. Concurrently, forex reserves rose to USD 14.51 billion, above IMF thresholds, covering ~2.5 months of imports. The stabilization narrative attracted renewed foreign capital, particularly into Shariah-compliant large-caps.

Against this backdrop, PACRA rated three funds out of twenty-one in the Islamic Equity category. The group posted an average return of ~55.62%, led by a top performer at ~73.51%. Pak Qatar Islamic Stock Fund (PQISF) delivered ~26.26%, underperforming the peer set and retaining its 1-Star rating. The Fund’s relative performance reflected both market selection and allocation positioning, with gains tempered by a sector mix that lagged the high-beta rally in certain cyclical names. As of June 2025, PQISF maintained ~89.3% equity exposure to capture upside in growth sectors, while ~5.9% was allocated to cash for liquidity and ~4.7% to other assets. Sector allocation remained concentrated in Oil & Gas Exploration (~26.23%), Power Generation & Distribution (~18.66%), and Cement (~14.52%), supplemented by Commercial Banks (~8.39%), diversified “Others” (~8.53%), and ~23.67% spread across various industries. While the Fund preserved its strategic focus on high-quality Shariah-compliant equities, sustained alpha generation will require sharper sector rotation and active positioning to narrow the performance gap with category leaders.