KARACHI, March 18: Banks have reduced their investment in the stocks from Rs39.5 billion at end-January to Rs37.7 billion at end-February 2004. According to data released by the State Bank , banks financing of carryover transaction generally known as badla financing has also slightly come down from Rs11.74 billion to Rs11.46 billion during this period.

"This shows that the commercial banks have booked some capital gains by profit-selling," said Karachi Stock Exchange Chairman Mr. Arif Habib when reached by Dawn over telephone.

The KSE 100- index rose from 4393 at end-December 2003 to 4841 at end-January and then closed almost unchanged at 4840 at end-February 2004. But in the month of February share prices shot up in the early part of the month pushing up the KSE 100-index to 4888 on February 6 but then gradually coming down and closing at 4840 at the month-end.

"This pattern also confirms the view that banks might have taken advantage of the rising share prices to book capital gains," said Mr. Habib meaning that the commercial banks made more net selling in February.

Bankers do not deny that. "Banks made huge profits through capital gains in 2003 and some of them are still doing that," said treasurer of a big local bank.