Shares rose yesterday as investors cheered the National Board of Revenue’s (NBR) substantial cut in capital gains tax to encourage big local and foreign investors.

The benchmark Dhaka Stock Exchange (DSE) DSEX index, which fell in the first three hours of trading to 5,175 points, started to rise after the tax authority announced its decision to reduce the capital gains tax rate half off, up to 15 percent on winnings. over Tk 50 lakh from the sale of shares.

The DSEX closed at 5,252.49, a two-week high, adding 61.63 points, or 1.18 percent, from the previous day.

The tax council’s move comes at a time when the country’s stock market has been volatile, with liquidity drying up partly due to a lack of interest among big investors and the central bank’s tight monetary policy.

On the DSE, the country’s premier stock exchange, turnover rose 31% yesterday to Tk 566 million, the highest since September 25 this year.

While investors welcomed the tax cut, one economist criticized the move, saying it would act as a barrier to combating income inequality.

“This is not a right and prudent decision,” said MA Razzaque, director of research at the Policy Research Institute (PRI) in Bangladesh.

He said capital market investors always demand low taxation, blaming market volatility.

“But when they make a profit of more than 50 lei, why won’t they pay more tax, despite the fact that taxpayers pay up to 25 percent of their income?” he asked.

“Now is the time to examine the tax exemption and examine it to increase the tax-GDP ratio. But the tax authority has taken an opposite position. The government could keep the rate unchanged,” he added.

However, Muhammad Abdul Mazid, former chairman of the NBR, said the step could help restore order and attract investors to the stock market.

Saiful Islam, president of Bangladesh DSE Brokers Association (DBA), said the market has reacted positively due to the reduction in capital gains tax rate.

“Everything in the market has been negative. And when a positive thing appears in the market, people accept it with joy,” he said.

“Among the big investors of the stock market there has always been a reluctance about the profit tax. After the announcement of the NBR to reduce the tax rate, the reluctance has largely been removed.”

“Both the market and investors have taken the initiative positively. Let’s see how long it lasts,” he added.

Yesterday, the DSES index, which tracks Shariah-based companies, posted the biggest gains. The DS30, which is an index of the top firms, also advanced.

All sectors that represent large amounts in market capitalization, the value of a company’s outstanding shares, performed positively, according to BRAC EPL Stock Brokerage Ltd.

At the Chittagong Stock Exchange (CSE), the CSE All Share Price Index (CASPI), rose 122.03 points, or 0.84 percent, to 14,584 yesterday.

Of the issues that changed hands on the DSE, 257 scrips saw a rise in prices. About 107 stocks declined and 32 remained unchanged.

Bangladesh Shipping Corporation emerged as the most traded stock with a turnover of Tk 19.7 million.