KARACHI: The stock market snapped four-day losing streak on Friday that had wiped off 3,058 points or 6.7pc from the KSE-100 index. The ferocious bulls made a comeback with a vengeance to toss the index up by intraday high of 1,206 points with closing seen on a stunning recovery of 1,008 points, or 2.36 per cent, to close at 43,788 points.

The positivity was widespread with almost all sectors recording gains in stock prices. The investors’ sentiments were elated by the general belief that the government would manage to secure the seats of chairman and deputy chairman for its candidates in the Senate, settling an issue that had given rise to political uncertainty.

But knowledgeable sources in the market including a major broker said that the withdrawal of tax exemptions with amendments in the Income Tax Ordinance, reported to have been approved by the federal cabinet to raise additional Rs100-150bn, were at the heart of the market meltdown in recent days.

However, the clarification which emerged on Friday regarding those tax exemptions which would now be presented in the National Assembly for approval, provided relief to the panicky investors. A major clause purported to be in the proposed bill related to withdrawal of tax exemptions on mutual funds which would have removed their pass-through status, subjecting mutual funds also to tax even when they distribute 90pc of their profit to certificate holders.

“The amendments which came to light on Friday in the first half showed no change in the tax exemptions to mutual funds while other amendments also had minimal effect on corporate profitability which triggered the bull run,” said a market strategist.

The leveraged investors had closed their positions at market rates rather than meet the margin requirements on Thursday that saw the largest sell-off of shares worth $9.03m by individuals (mainly the leveraged players).

The clearance also helped the market to bounce back. Cement and steel sectors contributed significantly to the surge in index on Friday. Other than cyclicals, banks, E&Ps, power, automobiles and O&GMCs also contributed to the index hefty gains. Among scrips, the major contribution to the market upsurge came from Lucky Cement, Hubco, HBL, PSO, Systems and DGKC.

The trading volume increased 9pc over the previous day to 443m shares. The traded value also rose by 22pc to $137.4m. Among participants, mutual funds, broker proprietary trading and insurance companies were major buyers while foreign investors, companies, banks and individuals liquidated their positions ahead of the weekend.

Published in Dawn, March 13th, 2021