Dhaka stocks witnessed the biggest single-day fall in nearly seven months on Tuesday due to panic-driven sell-offs as a rumor spread on the trading floor about tax imposition on capital gains.
Investors were anxious hearing rumours about 15 per cent capital gain tax on secondary market investments at the individual level and rushed to dump their holdings, market operators said.
However, the National Board of Revenue (NBR) has not yet issued any Statutory Regulatory Order (SRO) in this regard.
The market showed a positive momentum at the start, but the indices failed to sustain their gains after mid-session owing to heavy sell pressure on major sector stocks.
The sell-offs of a number of previously trendy stocks dragged the prime index of the Dhaka Stock Exchange (DSE) down 40.10 points to 6,316. The Index also lost 9.84 points from the previous day.
It was the biggest single-day fall since November 20 last year when the index slid 50 points.
Several top brokers said the rumor that capital gain tax would be imposed through a new income tax act had a negative impact on the market.
The fear of capital gain tax is completely baseless, they said.
Some unscrupulous groups are looking to make profits by destabilising the market, said Md Sajedul Islam, senior vice-president of the DSE Brokers Association of Bangladesh.
Investors should not fall into their trap, he said.
The stock market, which was gradually regaining its rhythm, has suddenly seen a drastic fall largely for the rumor, Mr Islam added.
He said an earlier SRO on tax exemption must be scrapped if the government seeks to impose capital gain tax on individual investors. And to cancel any SRO, a new SRO is required but no such SRO has been issued yet.
However, Mr Islam urged the NBR to clarify the matter as soon as possible in the greater interest of the market.
A lack of confidence among investors owing to economic uncertainties at home and abroad and higher inflation have kept the market depressed.
Inflation jumped to a decade-high at 9.94 per cent in May, which prompted some investors to book profits in anticipation of a tougher time ahead. The ongoing energy crisis adds to the crisis.
According to EBL Securities, stocks faced rumor-based sale pressure alongside concerns over macroeconomic uncertainties.
Large-cap stocks such as LafargeHolcim, Sea Pearl Beach Resorts, BSRM Steels, Navana Pharma, and Unique Hotel & Resorts had major contributions to the market plunge.
The market turnover dropped 13.5 per cent to Tk 10.87 billion, from the previous day's seven-month high turnover of Tk 12.57 billion.
Investors mostly focused on the life insurance sector that accounted for 17 per cent of the market turnover, followed by the fuel & power and food sectors.
The DS30 Index, which consists of blue-chip companies, also dropped 9.47 points to 2,188 and the DSES Index, which represents Shariah-based companies, fell 10 points to 1372.
Apart from the rumour tied to capital gain tax, political and economic uncertainties ahead of the national election intensified the decline in the indices, said International Leasing Securities.
A majority of the stocks saw price erosion; 157 issues closed lower, 25 higher and 182 remained unchanged on the DSE floor.
Almost all the sectors faced price corrections, with the cement sector enduring the highest drop of 3.70 per cent as the government proposed increasing duty on clinker imports, the main raw materials of cement, which would cut down profits of cement makers.
Mid-cap stocks dominated the turnover list. Associated Oxygen became the turnover leader with shares of Tk 529 million changing hands, followed by Intraco Refueling Station, Meghna Life Insurance and RD Foods.
Trust Life Insurance was the top gainer with a 9.96 per cent increase while Mir Akther Hossain was the worst loser, shedding 10 per cent.
The Chittagong Stock Exchange (CSE) nosedived with the CSE All Share Price Index (CASPI) losing 109 points to settle at 18,667 and its Selective Categories Index (CSCX) shedding 65 points to close at 11,169.
The port city's bourse traded 4.33 million shares and mutual fund units with turnover of Tk 185 million.