Stocks remained under pressure for the second week in a row as investors, notably financial institutions, appear to be reluctant to further expand their portfolios fearing political instability in the backdrop of persistent rumours about the change at the top.

There was, therefore, no trace of the year-end short- covering, which generally sets the trend for the new year account. The capital value tax (CVT), which is now part of the stock trading seems to have taken the steam out of the market at least for the near-term despite a cut in the rates as agreed by the bourses' chiefs.

A mid-week strong rally had raised hopes that the market is back on the rails but the following day bears again dominated the trading and pushed it in further recession.

Stocks are expected to limp back to their pre-reaction levels possibly by the next week as a section of leading investors are back in the market and have resumed covering operations at the attractively lower rates on the perception that the revised CVT is now a reality.

Alone on technical grounds including being in a highly oversold position the market is expected to stage a grand rebound by the next week if all went well on the political front and news from Islamabad are not that disturbing, analysts said.

Some of the corporate announcements made during the last week, notably from the Security Leasing Corporation (10 per cent cash, 10 per cent bonus shares plus right shares of 9.1 per cent, and 30 per cent cash of the Exide Pakistan were on the higher side of the market expectations. Others are due after the Mari Gas announced second interim of 10 per cent.

But during the standoff, the CVT has taken its toll both in terms of falling volumes and persistent price decline in the blue chips as well as second-liners, causing major dents in their portfolio values just in two post-budget weeks.

The future market direction will also be guided by the rumoured political changes at the top as the news from Islamabad are not two encouraging and may add significantly to the current uncertainty.

"The post-budget rally backed by a number of fiscal incentives and tax cuts for the corporate sector in the national budget is still to manifest itself and possibly the next week could witness a major change in the market psychology", brokers said.

However, small and genuine investors were conspicuous by their absence as they are still in two minds about their profit margins after paying higher transactional costs on their modest share purchases and sales.

It was a terribly bad opening for the market, which seems to have decided to live with the additional transactional costs on share business in the form of the CVT and no one was sure how will it behave in the coming sessions.

After breaching through two successive crucial psychological barriers of 5,200 and 5,100, and wiping out Rs33.568 billion from the market capital, the KSE 100-share index finally managed to finish from the week's lows, off 144.00 points at 5,105.78 points.

There was panic after the trading resumed as terribly disturbing news kept pouring, which was followed by a wave of selling offers and as there were not many buyers even at the falling prices, the situation further got accentuated.

"What seems to have caused a major dent in the prevailing price structure was the statement from the US State Department that any political changes in Pakistan will not hurt the country's image abroad", analysts said, adding "the President's fears of retaliation of Wana operations further aggravated the market sentiment".

Despite investment-friendly federal budget, the CVT-hit market was trying to get out of the post-budget impasse, the fresh bearish factors crept in, which are more damaging than the tax-net, they said.

"I hate to predict about the future market trend", says a leading analyst who added, "but was of the firm opinion that those who have the money and the holding capacity can go for selected stocks around the current levels".

Leading brokers by now have a fair idea about the CVT and have decided to live with it despite the fact that in its amended form it could make share business more inhibiting many prospective investors because of higher cost of purchases and sales, they added.

Many leading brokers fear the future share business outlook may not be that promising as the perception of political instability could be more harmful than any other single bearish factor.

But some others claim the political instability is largely based on the rumours being circulated by some of the vested interests as far as the present set-up is concerned.

"It appears to be in full control of the situation. I think prices of most of the dividend-paying companies had dropped to an attractively lower levels and financial traders may not sit idle and miss the bait despite year-end closing", said a leading analyst.

Minus signs dominated the list under the EFU Life Insurance, the Atlas Honda, the National Foods, the Gatron Industries, the Island Textiles, the Aventis, the Wyeth Pakistan, the Al-Ghazi Tractors, the Nestle MilkPak, the BOC Pakistan, the Security Papers, the Central Insurance, the PSO, the Shell Pakistan, the Pakistan Oilfields, the HinoPak Motors, and many others.

The TRG (r) Pakistan, the Crescent Steel, the Shezan International, the Pakland Cement, the PICIC Investment Fund and Island Textiles, the IGI Insurance, the Arif Habib Securities, the Javed Omer, the Ferozsons Lab, the Grays of Cambridge, the Glaxo- SKF, the Haroon Oils, and some other managed to wipe out major portion of early losses.

FORWARD COUNTER: Leading shares on the cleared list also followed the lead of their counterparts in the ready section and fell in unison under the lead of the OGDC, the PSO, the PTCL, the Bank Alfalah and the Hub-Power. But on the other hand, the ICI Pakistan, the Engro Chemical, the Fauji Fertiliser, the MCB, the Maple Leaf Cement and some others performed well on active demand triggered by reports of higher earning.