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Market cheers exemption on capital gains tax

KARACHI — The tax exemption on Capital Gains Tax (CGT) for the next two financial years put the market back on the rails after several lean sessions during the last week. Bullish sentiments dominated the trading followed by a galore of upper locks on selected counters.

The KSE 100-share index recovered 1,004.05 points at 1,3134.56, adding Rs300 billion to the market capital at Rs4,046.314 billion.

Although pre-budget rumours about the relief in taxes did take their toll on some of the counters, but the on-balance the trend remained uppishly inclined thanks to strong selective support at the attractively lower levels.

"There could be some post-budget sectoral adjustments linked to taxation measures, indications are that the extension of exemption on capital gains tax alone could keep the market in a good shape," said a stock broker. "Indications are that the budget would be investment friendly," he added.

The post-budget market scenario was being discussed by some of the leading stock analysts including the direction of the KSE index if all goes well with the fiscal measures.

The big question being debated by the analysts was whether or not the index will better its previous all-time record level of 15,976 established early this year alone on a positive budget sans political uncertainty, some brokers question.

It was in this background that the KSE 100-share index roared back to its pre-reaction level and surged by 6.5 per cent on heavy buying triggered by two-year extension in the Capital Gains Tax exemption and status quo on the Capital Value Tax.

It virtually run-up on heavy covering purchases in the index heavy base shares and finished close to at the week's high and a massive surge of 610.03 points, recouping a massive amount of Rs185.479 billion to add to the market capital at Rs4,037.85 billion on Wednesday alone.

"The new regime has given its pre-budget maiden gift to the investors well above their demand," analyst Faisal A. Rajabali said.

"The demand was a year's extension but they made it for two years and all cheers for the new economic managers," he added.

The massive index rise, which allowed the market capital to recoup about Rs185 billion was, however, was not an all-time single session as high as it was set on January 3 this year after the postponement of elections from January 8 to February 18.

"The market's massive run-up in the backdrop of some political irritants signals that there could be more pleasant surprises for the stock traders including no new tax followed by a rigid status quo," another analyst Hasnain Asghar Ali predicts.

The market, which had been awfully weighed during the last month and had lost about 2,000 points or nine per cent is expected to be in its real self atleast during the pre-budget sessions, he added.

"Investors, who had been in the mourning mood after the successive market crashes during the last month, welcomed the tax exemption as was reflected by heavy covering purchases on all the counters having potential of capital gains at the current lows," another analyst Ahsan Mehanti said. "Oil, bank, cement, and blue chips on the other counters rose sharply but without matching selling from any quarter," he added.

The general perception is that the current buying euphoria could be sustained during the pre-budget sessions as major investor worry on the CGT has been removed and that is perhaps why sellers kept to the sidelines anticipating further rise in share values.