The local share market failed to maintain the bullish rally on Wednesday, with prices falling across the board, in reaction to doubling of taxes levied on stock business.
The LSE-25 index lost 195.27 points or 4.17 percent to close at 4486.33 as compared to 4681.60 of Tuesday. Volume reduced to 43.603 million shares from 64.718 million of the previous session, registering a fall of 21.115 million shares or 32.62-percent.
The market strongly reacted to doubling the taxes on stock business in the federal budget 2006-07 and all key shares retreated sharply with the index falling below 4500 level. The volume was also very low which implied lack of interest in the market, stock brokers said, adding as soon as real picture of the budget with reference to the taxes on stock business is turning clear, the market is reacting to it.
According to analysts, on Tuesday the market had responded positively after the institutions, particularly the public sector funds came in for the buying. In initial hours, the index was down by 250 points, but later when on advice of the government institutions came in for the support, the market rebounded.
On Wednesday the thrust of pressure was seen almost in all key chips, including the oil and gas sector and banks with Pakistan Oilfields and PPL undergoing heavy losses.
Besides public sector funds buying, another factor that benefited the sentiment in the preceding session was misunderstanding about the levies by the brokers, said Mirza Muhammad Irfan, equity research head of Capital Vision Securities Ltd, adding the first reaction was that the government had only doubled the CVT ie from 01 percent to 02 percent. But later the brokers realised all taxes imposed on the market had been doubled.
"Now it is clear that the ratio of CVT, withholding taxes, etc, which was 0.25 percent would increase to 05 percent and what we witnessed on Wednesday, in fact, was reaction of doubling this ratio," he said.
On Wednesday, all the key chips, including PSO, PPL, MCB and OGDC reached their upper cap limits, he maintained. There was also no support from the institutions due to which volume stayed very low. The budget has disappointed the stock market people as all their worries regarding taxes have proved true, he added.
Because of these reasons, the market is likely to remain under pressure and unless volume, which at present is very low, improves and sustains at good levels, there seems no let-up in the pressure. Out of a total of 98 traded scrips, six improved, 48 landed in minus zone, and 44 stayed intact to their previous levels.
Among major gainers, Ghazi Fabrics gained 85 paisa, Hub Power Company 25 paisa, while Prime Commercial Bank, DG Khan Cement and Pakistan Premier Funds 5 paisa each. In minus column, Pakistan Oilfields shed Rs 12.00, PPL Rs 10.95, MCB Bank Rs 10.75, National Bank Rs 10.55 and PSO Rs 9.10. The National Bank and the OGDC were the volume leaders with 6.671 million shares and 6.191 million shares, respectively.
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