The stock market plunged in its first post-budget session, as the benchmark KSE-100 Index was down nearly 1000 points in intra-day trading with investors gauging the impact of new budgetary measures imposed by the government.
At around 2:15 pm, the KSE-100 was hovering around 41,006.75, a fall of 1,007.98 points or 2.4%.
On Friday, the KSE-100 index rose 278.77 points, or 0.67% to close at 42,014.73 points in anticipation of the budget.
The market is reacting negatively to the budgetary measures announced by the government on Friday, according to Sana Tawfik, vice-president of research and a senior analyst at Arif Habib Limited (AHL).
The analyst said that the increase in taxes on the banking sector, an index heavyweight, is contributing to the slump. The auto sector, which was also hit by taxes, was down during trading.
The federal government on Friday proposed to increase the tax rate for the banking sector, i.e., from 39% to 45%, including Super Tax for the next fiscal year.
Finance Minister Miftah Ismail said in his budget speech that the banking sector has enjoyed windfall gains due to higher interest rates and risk-free investment in government securities. Therefore, to capture the real tax potential, the tax rate on banking companies is proposed to be enhanced to 45%.
“Banking sector profitability may decline by 19% due to these proposals,” said Tawfik. “With inflationary pressures continuing to rise globally, we expect the Fed to raise interest rates soon,”
“US consumer prices hit a new four-decade high in March, rising 8.6%,” she said. “With Russia’s war on Ukraine continuing to pressure global fuel and food prices, and amid ongoing supply chain uncertainties due to Covid-19 lockdowns in Asia, experts now say the expected easing of inflationary pressures will take much longer to materialize.”