Karachi- Pakistani stocks rose by 2 per cent and the rupee made another recovery against the US dollar on Tuesday amid hopes that political stability will return following Pervez Musharraf's resignation, traders said.

"Investors are back in the market," said Munir Ladha, the director of Karachi Stock Exchange.

The benchmark KSE-100 Index was up by 199 points to close at 10,919, while the rupee recovered by 3 per cent to close at 74/74.50 (buying and selling) against the dollar in the open market.

Some investors feel Pakistan's coalition government, blamed for not doing enough to boost the economy in four months, can now concentrate on grappling with the growing trade deficit and rising inflation that stands at a 30-year high.

Pakistani stocks lost 40 per cent of value since January and the rupee lost 18 per cent in four months due to political turmoil. (dpa)