Stocks tumble below 5,600 mark as investor sentiment turns sour

Stocks tumbled below 5,600 mark again this week, wiping out all the gains of the previous two weeks, as investors opted to flee the riskier assets amid persistent macroeconomic uncertainties.

The investors trimmed their exposure to the stock market owing to macroeconomic volatility stemming from inflation pressure and declining forex reserves while the issue of capital gain tax in the next budget dampened the market sentiment, experts said.

Moreover, investor sentiment took a hit due to potential interest rate hikes following the latest increase in policy rate amid a tightened money market.

The rising interest rates already turned fixed-income instruments more lucrative, compared to the equity market, while a further rate hike is likely to worsen the situation, said a leading stockbroker.

Alongside, a big devaluation of the local currency may intensify market instability, he added.

During this week, the benchmark equity index of the Dhaka Stock Exchange (DSE) was dragged down by dominant selling pressure in the last four trading days, out of five, amid concerns over the market outlook owing to a challenging external environment.

Substantial price erosion of selective large-cap stocks dragged the key DSEX index down almost 144 points or 2.54 per cent to settle at 5,517, the lowest in more than three years since May 3, 2021, after gaining 80 points in the past two straight weeks.

"The market recovery was impeded due to growing concerns regarding the market momentum following the proposal to impose taxes on capital gain over Tk 4 million on the next budget, leading investors to trim their exposure to equity investments," said EBL Securities.

Pubali Bank, BAT Bangladesh, Renata, Beacon Pharma and Square Pharmaceuticals suffered the biggest losses and contributed largely to the week's index plunge.

As the investors' participation plummeted and large-cap stocks prices kept falling, investors became wary about further correction which triggered a panic sale.

The blue chip index DS30, a group of 30 prominent companies, also dropped more than 41 points to 1,974 while the DSES Index, which represents Shariah-based companies, lost 30 points to 1,212.

Turnover, a crucial indicator of the market, also fell to Tk 38.21 billion this week as against Tk 48.05 billion last week.

Accordingly, the average daily turnover dropped to Tk 7.64 billion, which was more than 20 per cent lower than the previous week's tally of Tk 9.61 billion.

Investors were mostly active in the pharmaceutical sector, which accounted for 22 per cent of the week's total turnover, followed by the textile sector (13 per cent) and food sector (9 per cent).

Majority of traded stocks saw price erosion, as out of the issues traded, 290 declined, 85 advanced and 17 remained unchanged during the week.

Most of the sectors saw price correction with the jute sector witnessing the highest correction of 9.4 per cent, followed by paper, travel, services, textile, pharma, telecom, engineering and banking sectors.

eGeneration dominated the weekly turnover chart, with shares worth Tk 1.47 billion changing hands, followed by Asiatic Laboratories, Navana Pharma, Best Holdings and Lovello Ice-cream.

Reliance One Mutual Fund was the week's top gainer, posting a 26.8 per cent rise while IPDC Finance was the worst loser, shedding 13.1 per cent.

The Chittagong Stock Exchange also ended sharply lower, with its All Shares Price Index (CASPI) shedding 225 points to 16,006 and the Selective Categories Index (CSCX) losing 134 points to 9,637.

Of the issues traded, 236 declined, 76 advanced, and 25 others remained unchanged on the CSE.

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