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The Real Shift: From Rerating to Earnings
The rally from 40k levels was largely a P/E rerating cycle.
The economy stabilized.
External account pressure eased.
Policy rates peaked.
Liquidity surged.
Multiples expanded.
Now the easy money is done.
From here onward:
• Returns will depend on earnings delivery.
• Spread compression matters (see Meezan Bank).
• Sector selection replaces index momentum.
This is the natural second phase of a bull cycle.
New investors expecting 2024-style explosive gains will be disappointed.
Disciplined investors will adapt.
Banks: Bigger Franchise, Thinner Spread
Meezan Bank is a perfect case study.
Deposits crossed Rs3.3 trillion (+28%).
Profit after tax declined.
Why?
Because in falling-rate cycles, asset yields adjust faster than funding costs.
Franchise expanded. Spread compressed.
This matters.
Bank rallies without earnings torque eventually pause.
That’s repricing — not panic.
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