The benchmark index of the Dhaka Stock Exchange (DSE) slipped below the 5,900-point mark on Sunday, as investors booked profits in recently rallied stocks while assessing the potential impact of proposed changes to the country's margin financing rules.
Market analysts say broad-based selling pressure hit major sectors, including insurance, engineering, food, pharmaceuticals, telecommunications and banking, following weeks of strong gains.
The DSEX had climbed above the 5,900-point level for the first time in nearly two years last week, buoyed by a series of regulatory reforms and capital market-friendly government policies that boosted investor confidence.
"The recent rally prompted many short-term investors to lock in profits," said a leading stockbroker.
He added that investors were also evaluating the implications of the Bangladesh Securities and Exchange Commission's (BSEC) proposed amendments to the margin financing rules, which temporarily dampened market sentiment.
Insurance stocks came under notable selling pressure after the BSEC proposed revising margin financing eligibility criteria by replacing the price-to-earnings (P/E) ratio with the price-to-book (P/B) ratio for banks, financial institutions and insurance companies.
Under the draft rules, banks and financial institutions with a P/B ratio above three and insurance companies with a P/B ratio above one would no longer qualify for margin financing, raising concerns that demand for some shares in those sectors could weaken.
According to EBL Securities, the market extended its corrective trend as persistent selling reflected investors' cautious reaction to the draft margin financing rules.
"Although selective buying initially helped cushion early losses, renewed selling pressure emerged after the publication of the proposed amendments, keeping the market under pressure throughout the session," the brokerage said in its daily market commentary.
The DSEX, the benchmark index of the DSE, declined by nearly 45 points, or 0.76 per cent, to close at 5,856.18, extending its cumulative loss to about 71 points over the past two trading sessions.
The DS30 Index, which tracks blue-chip stocks, fell 17 points to 2,210, while the DSES Index, comprising Shariah-compliant companies, shed nine points to 1,197.
Among the major contributors to the index decline were Walton Hi-Tech Industries, BRAC Bank, Square Pharmaceuticals, BSRM Steels and Olympic Industries, which together accounted for nearly 14 points of the DSEX's fall.
Despite the correction, trading activity remained healthy. Turnover on the premier bourse stayed above the Tk 10 billion mark, although it eased from the previous session. Total turnover stood at Tk 10.70 billion, compared with Tk 11.18 billion in the preceding trading day.
Market breadth remained firmly negative, reflecting widespread selling pressure. Of the 392 issues traded on the DSE, 245 declined, 98 advanced and 49 remained unchanged.
Malek Spinning Mills topped the turnover chart with shares worth Tk 269 million changing hands, followed by Techno Drugs, Shepherd Industries, BSRM Steels and LankaBangla Finance.
Among the day's performers, Green Delta Mutual Fund emerged as the top gainer, advancing 10 per cent, while Meghna Insurance suffered the steepest decline, falling 8.86 per cent.
The Chittagong Stock Exchange (CSE) also ended lower. Its All Share Price Index (CASPI) dropped 66 points to 15,748, while the Selective Categories Index (CSCX) lost 61 points to close at 9,639.
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