The benchmark KSE-100 index reversed its losses on Friday on the back of the rupee's strong recovery and expected inflows.
According to the Pakistan Stock Exchange (PSX) website, the benchmark index had gained 386.33 points, or 0.91 per cent, by 12:26 pm to reach 42,629.66 points.
On Thursday, stocks snapped a five-day rally due to political noise and a hike in the power tariff.
However, the stocks started reversing losses shortly after trading opened today.
Ahsan Mehanti of Arif Habib Corporation said stocks showed "sharp recovery" on the rupee's appreciation and Finance Minister Miftah Ismail's statement that the United Arab Emirates would invest $1 billion in the PSX.
Head of Research at Intermarket Securities Raza Jafri said the rupee's continued strengthening and news of the letter of intent being received from the International Monetary Fund (IMF) are leading the stock market higher.
He was referring to a report published in The News which quoted finance ministry officials as saying that they expected an agreement on the letter of intent "any time soon".
Earlier today, the local currency jumped by Rs3.28 against the dollar in the interbank market to reach Rs215.6.
Director of First National Equities Limited Amir Shehzad also shared a similar view. He said a bullish trend could be seen after the improvement in the rupee's value, and investors were prioritising energy stocks.
Shehzad said the bullish momentum could continue into next week, adding that if the IMF tranche was received before August 19, it could mean the monetary policy would remain unchanged, which would, in turn, accelerate investment in the stock market.