Pakistan's benchmark share index pared most of its earlier gains at closing on Friday after crossing the key 80,000 mark for the first time, as investors booked profits following a post-budget rally.

The index closed up 0.08% after having climbed 1.6% to an intraday record high of 80,059 points.

The market rally was primarily driven by the annual budget that strengthened the case for a new bailout from the International Monetary Fund, as was widely expected by investors.

The KSE 100 has risen roughly 9%, since the government presented the budget on June 12, which was welcomed by investors as it avoided an anticipated increase in capital gains tax despite an ambitious tax revenue target.

"Some profit-taking was inevitable, especially considering futures rollover next week," said Muhammad Ali, analyst at AKD Securities.

"Investors with capital losses will look to book gains before the year end (June 30)," said Mustafa Pasha, chief investment officer at Lakson Investments, adding that heightened volatility is expected in the last week of the fiscal year as institutional investors adjust their holdings.

Ali added that banking stocks have been responsible for more than half of the recent rally, led by institutional and corporate buying, with minimal trading participation from other major sectors, including the cyclicals.

The financial sector was up 0.4% on Friday after climbing 4.4% in the previous session.

"Banking stocks continue to offer some of the highest forward dividend yields on the PSX, almost on par with fixed income securities, ranging between 15% and 20%. Hence, they continue to be viewed as most attractive by participants," said Ali.

Pakistan's central bank cut its key rate by 150 basis points last week - its first rate cut in nearly four years, after inflation slowed to a 30-month low of 11.8% in May.

On Tuesday, Fitch said that Pakistan's ambitious budget targets strengthen the prospects for an IMF deal.

"Any correction in the market, should be shortlived if visibility on a new IMF program emerges in July," said Pasha following a 0.8% dip in the market during the session on Friday.

The benchmark index has almost doubled since Pakistan signed a last minute nine-month standby arrangement with the IMF in June, which helped avert a sovereign default.

(Reporting by Ariba Shahid in Karachi; Editing by Rashmi Aich and Shinjini Ganguli)