KARACHI: Karachi Stock Exchange (KSE) ended lower on Tuesday as investors remained cautious ahead of the federal budget for fiscal year 2011/12 (July-June), which is scheduled to be unveiled on Friday.
"There is some pre-budget nervousness in the market and that is why most investors preferred to play safe and not go for aggressive positions," said Khalid Iqbal Siddiqui, director at brokers Invest and Finance Securities.
KSE benchmark 100-share index ended 0.42 percent, or 51.08 points, lower at 12,144.51 on turnover of 123.1 million shares.
Dealers said investors are expecting the removal of a capital gains tax (CGT) in the upcoming budget.
"If the CGT is removed in the budget, that could prove to be a strong catalyst for the market," said Siddiqui.
In the currency market, the rupee eased to 85.90/95 to the dollar from the close of 85.80/85 a day earlier, thanks to steady dollar demand from importers.
The rupee hit a record low of 86.50 last week and dealers said the local unit may face pressure in days ahead amid increased demand for dollar for import payments and a bleak outlook.
There are also concerns about the cut in the much-needed foreign aid after al Qaeda chief Osama bin Laden was found and killed in Islamabad on May 2.
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.
The rupee's slump to a record low comes a little over a month after it rose to an 11-month high suggesting its outlook has weakened because of uncertainty following bin Laden's death.
In the money market, overnight rates ended between 13.75 and 13.90 percent, little changed from the previous day.
Dealers said the market was not eyeing the fortnightly treasury bills auction on Wednesday, for which the central bank has set a target of 175 billion rupees ($2.04 billion).
Copyright Reuters, 2011
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