KARACHI, June 14: Stocks on Monday crashed on panic selling triggered by the imposition of 0.1 per cent Capital Value Tax (CVT) on the purchase of shares by investors in the next year's federal budget , eroding Rs44bn from the market capital just in one go.

After early plunging by 200 points, the KSE 100-share index, however, finished partially recovered from the day's lows on reports that the CVT may be withdrawn, off 166.91 points at 5,217.57 amid light volume of 196m shares.

The post-budget opening witnessed panic all-around as everyone was out to unload his long positions fearing further erosions if the CVT was not withdrawn immediately, analysts said. "It could cause the murder of a perfectly robust market if not withdrawn."

"It appears to be a budgetary joke by the finance minister to restore sanity to the share market," one broker jokingly remarked. "Rest assure it will be amended or withdrawn."

"Investors need to be taxed who had become multimillionaire during the last two years' stock market boom," another said adding but the finance minister should know "windfall profits yes, but without government share in them."

However, the selling appears to be inspired as it was directed against the leading index shares, notably PTCL and OGDC, which together hold a weightage of 40 per cent in it. A one rupee fall in OGDC takes away 20 points from the index and it shed Rs2.30 over the day.

The KSE 100-share index at one stage plunged by about 200 points or four per cent but some late rethinking in the issues evoked stray covering purchases at the lower levels. It finally finished, off 167 points at 5,217.57.

"The imposition of the CVT surprises everyone as it takes away the financial benefits of the extension of the capital gains tax up to 2007 in the same breath," they said.

Since Sunday, a high-powered delegation of the bourses is in Islamabad and has already met the CBR chief and was due to meet the finance minister today to tell him the negative fallout of the CVT on the share business.

"There is a loud whispering in the market that the finance minister has promised to withdraw the CVT after meeting the bourses chief and the market could bounce back tomorrow, although investor confidence has been badly shaken," some brokers said.

The 0.1 per cent Capital Value Tax, to be known as turnover tax seeks to raise about Rs10 billion from the share business but it will certainly limit transactions as investors will think twice for going more shares. It will also have a negative impact on the broker incomes.

Barring some leading textile shares, all other sectors, notably energy, cement, auto, chemicals, papers and banks fell in unison on persistent selling at the inflated levels.

Prominent losers were led by Dawood Hercules, PSO, Shell Pakistan, National Refinery and Javed Omer, falling by Rs6.95 to Rs32.25. Others notable losers included Jahangir Siddqui Bank, Attock Refinery, Mari Gas, Pakistan Oilfields, Suzuki Motors, Century Papers, Al-Ghazi Tractors, Indus Motors and many others, off Rs4 to Rs6.45.

Some of the textile shares managed to finish higher under the lead of Din Textiles, Gadoon Textiles, Artistic Denim, up by Rs2.80 to Rs5 followed by Gul Ahmed Textiles, Dadex, and PICIC, up by Rs2 to Rs3.90.

As was expected traded volume shrank to 196.049m shares as investors were not inclined to go beyond their minimum because of the CVT, while losers held a strong lead over the gainers at 302 to 33, with nine shares holding on to the last levels.

PTCL topped the list of most actives, lower 90 paisa at Rs41.20 on 29m shares followed by OGDC, off Rs2.30 at Rs63.10 on 27m shares, Fauji Cement, easy by one rupee at Rs17.40 on 12m shares, National Bank, down Rs3.20 at Rs61.70 on 10m shares and Sui Southern Gas, easy by Rs1.70 at Rs32.30 on 9m shares.

Other actives were led by Hub-Power, lower 75 paisa on 9m shares, KESC, easy 20 paisa on 8m shares, Pak PTA, off 75 paisa also on 8m shares, Prudential Modaraba, easy 20 paisa on 7m shares and DG Khan Cement, off Rs3.05 on 7m shares.

FORWARD COUNTER: All leading shares on the cleared list received massive battering under the lead of the PSO, off Rs7.60 at Rs249 on 2m shares followed by MCB, Sui Northern, Engro Chemical and Fauji Fertilizer, which suffered fall ranging from Rs1.95 to Rs3.60.