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The benchmark equity index plummeted on Monday, snapping out of the month-long gaining momentum, as cautious investors preferred to bag profits in quick-gaining stocks.
Market experts said the correction was due to profit taking in stocks that had experienced substantial price appreciation in recent times, particularly bank stocks, amid improving macroeconomic indicators.
The key index surged 642 points or 13 per cent in the month through Sunday, hitting a 10-month high, which prompted cautious investors to book profits the day after.
Most bank stocks had gone up by more than 20 per cent in the month to Sunday. Trust Bank, for example, soared 23 per cent during the month before losing 9 per cent on Monday. It was the day's top loser.
Bank stocks witnessed major corrections on Monday. As many as 30 bank stocks ended in the red and five remained unchanged. Only Jamuna Bank posted a marginal gain out of 36 listed banks.
Some of the banks have reported massive losses for the January-June period this year as their defaulted loans escalated after the political changeover. The earnings disclosures might be another reason for the price erosion.
The banking sector experienced the highest loss of 1.82 percent, with seven banks --- SBAC Bank, UCB, NRB Bank, First Security Islami Bank, Mercantile Bank and ONE Bank - on the day's chart of top losers.
"The momentum traders, who had taken positions in the banks stocks, booked their desired gains, leading to the index fall," said Akramul Alam, head of research at Royal Capital.
That, according to Mr Alam, was a positive sign because, he said, when investors make profits, they become more confident and invest more.
The declining yield rates of government securities, improvement in the macroeconomic situation and the favourable outcome from tariff negotiations with the US might have given a boost to investor confidence in the equity market, he said.
"There is no reason for worry for investors," added Mr Alam.
On Monday, the market opened with active participation on both sides of the trading fence but selling pressure mounted in major stocks in the latter half of the session, dragging the indices.
The DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), finally slid more than 50 points or 0.91 per cent to 5,486, after gaining 238 points in the previous three trading sessions.
"Profit-taking selling frenzy took control of the bourse, with many investors choosing to realize their recent gains," said EBL Securities.
The prime index surpassed the 5,500 mark after 10 months on Sunday while the market turnover crossed Tk 11 billion for the first time in a year amid improving macroeconomic factors, such as healthy foreign exchange reserves, rising exports, and record remittance inflows.
Major blue chip stocks, such as Square Pharma, Walton, BAT Bangladesh, Pubali Bank, Eastern Bank and Beximco Pharma largely continued to the index fall on Monday.
The DS30 index, a group of 30 prominent companies, lost more than 20 points to 2,130 while the DSES Index, which represents Shariah-based companies, shed 8 points to 1,185.
On the bright side, investors were active in the market as the market turnover remained at a satisfactory level -- Tk 9.12 billion, which was 20 per cent lower than the previous day's one-year high
The non-bank financial institutions lost 1.3 per cent, followed by food & allied 1.2 per cent, engineering 0.6 per cent, telecom 0.5 per cent and pharmaceuticals 0.34 per cent.
The banking sector, however, kept its dominance in the turnover chart, capturing 26 per cent of the day's total turnover, followed by pharmaceuticals' 14 per cent and fuel & power's 9 per cent.
Losers took a strong lead over gainers, as out of the 397 issues traded, 207 closed down, 122 ended higher and 68 remained unchanged on the Dhaka bourse.
Jamuna Bank became the most-traded stock, with shares worth Tk 316 million changing hands, closely followed by Bangladesh Shipping Corporation, City Bank, Orion Infusion, and Uttara Bank.
The Chittagong Stock Exchange also returned to the losing streak, with its All Shares Price Index (CASPI) shedding 68 points to 15,404, while the Selective Categories Index (CSCX) lost 42 points to 9,456.
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