Market responds positively to budget measures, outlay

Stocks closed up on Wednesday as investors hope that the measures announced by the government in the budget, like unchanged sales tax and increase in public sector development fund, will propel fresh investment in the stock market, dealers said.

Madiha Javed, head of research at Ismail Iqbal Securities, said, “Benchmark KSE-100 shares index remained volatile throughout the session.” Much awaited budget was unveiled on Tuesday with higher and new taxes aimed to increase revenue.

“Overall budget impact is neutral to negative for most major sectors except pharmaceuticals. Fertilisers, E&Ps and cement were the main gainers contributing 189.8 points cumulatively,” she added.

Pakistan Stock Exchange (PSX) KSE-100 shares index gained 0.80 percent or 278.08 points to close at 34,937.93 points level. KSE-30 shares index followed suit with a high of 1.19 percent or 193.73 points to end at 16,507.66 points level.

Of 327 active scrips, 216 moved up, 84 retreated, and 27 remained unchanged. The ready market volumes stood at 150.978 billion shares, as compared with the turnover of 116.931 billion shares in the previous session.

Analyst Ahsan Mehanti from Arif Habib Corporations said, “Stocks closed bullish in the post-budget session led by selected scrips across the board, as investor cheered record federal budget outlay of Rs7.022 trillion for FY20 and easing of tax measures on the PSX investors.”

The current account deficit target of $8.3 billion or three percent of GDP for FY20, stability in rupee parity and likely execution of Rs20 billion market support funds later this week played a catalytic role in the bullish close, Mehanti added.

A leading analyst from Habib Metro-Financial Services said that absence of a highly anticipated hike in GST and relatively evenly distributed indirect taxation were positive surprises in the budget. “We expect the market to remain choppy in the near-term as investors set sights on the formal approval of IMF bailout package,” he added.

The market displayed sideways movement amid relatively thin participation in the first trading session, post release of budget FY20.

A heap of new taxation measures especially uniform rate of 15 percent CGT across all classes of investors for all holding periods and increase in taxes on dividends paid by IPP’s failed in creating a major jolt.

A leading analyst said strict austerity measures, higher taxation on individual’s income, removal of zero-rated regime for textiles, increase in sales tax and FED for various products alongside a move to erase the filer and non-filer distinction (by proposing heavy punitive measures on those who opt not to file tax returns in FY20) were the main highlights of PTI’s first full budget since assuming power.

The highest gainers were Pakistan Suzuki, up Rs13.74 to close at Rs288.63/share, and Sitara Chemical, up Rs11.18 to finish at Rs287.34/share.

Companies that booked highest losses were Sanofi-Aventis, down Rs24.99 to close at Rs645.01/share, and Jubilee Life Insurance, down Rs15.30 to close at Rs290.70/share.

BOP recorded the highest volumes with a turnover of 18.499 billion shares. The scrip lost Rs0.21 to close at Rs9.79/share.

The lowest volumes were witnessed in Lotte Chemical, recording a turnover of 3.688 million shares, whereas the scrip gained Rs0.33 to end at Rs15.14/share.