KSE end lower, investors cautious ahead of budget

KARACHI: Karachi Stocks Exchange (KSE) ended lower on Thursday ahead of the announcement of the budget for the next fiscal year, but dealers said an expected removal of a capital gains tax on individual investors should boost to the market.

According to media reports, the government may decide to remove the capital gains tax. A 10 percent capital gains tax is imposed on stocks held for six months or less and 7.5 percent on stocks held between 6 months to a year.

Officials from the finance ministry have declined to comment.

"Its just that investors are being extra cautious ahead of the budget, and this cautious approach is likely to be seen tomorrow as well," said Ashraf Zakaria, a dealer at brokers Ali Hussain Rajabali and Co.

"But if the capital gains tax is removed in the budget, as is being widely expected, this should help the market and volumes will surely pick up," he said.

KSE benchmark 100-share index ended 0.69 percent, or 184.25 points, lower at 12,179.81 on turnover of 87.31 million shares.

In the currency market, the rupee edged lower to close at 85.93/98 to the dollar from 85.92a day earlier, amid steady dollar demand.

"The demand for the dollars is pretty steady, but inflows were good as well today, so the rupee id not fall much," said a dealer at a foreign bank.

The rupee hit a record low of 86.50 last week and dealers said the local unit may face some pressure in days ahead amid increased demand for dollar for import payments and a bleak outlook.

The rupee has lost more than 1.5 percent of its value since then, almost the same as its total loss of 1.53 percent in 2010.

I think the rupee will trade in the band of 85.80-86.05 in the near term," said the dealer.

In the money market, overnight rates ended at around 12 percent, after closing at 11.0 percent a day earlier.

Copyright Reuters, 2011