After a challenging year, capital market eyes resurgence in 2026: EBL Securities

Amid political shifts and evolving political and macroeconomic realities, the country's capital market went through a challenging and turbulent year in 2025, nearly hitting rock bottom.

EBL Securities, which operates a research wing alongside its brokerage business, expects the capital market to show signs of resurgence in 2026, driven by optimism surrounding political clarity and favourable macroeconomic tailwinds.

Elaborating on expectations, Mohammad Rehan Kabir, head of research at EBL Securities, said that as political clarity emerges alongside regulatory policy certainty, the capital market is likely to attract fresh investment, which should help generate positive momentum.

Infographic: TBS

Throughout the year, the DSEX – the benchmark index of the Dhaka Stock Exchange (DSE) – may hover between 4,600 and 5,800 points, while average daily turnover is projected to remain around Tk6 billion to Tk8 billion, he said.

For the capital market, 2025 proved to be one of the most difficult years, marked by persistent volatility, weak investor participation, and a steady erosion of confidence.

Despite a series of regulatory initiatives and reform-oriented measures, the market remained under pressure throughout the year, weighed down by political uncertainty, economic challenges, and a prolonged absence of fresh listings, market analysts said.

The benchmark DSEX index ended the year at 4,865 points, shedding 351 points, or 6.73%, from the previous year. The blue-chip DS30 index also declined sharply, losing 86 points, or 4.44%, to settle at 1,853.

In its yearly market review and outlook 2026, published at the end of 2025, EBL Securities said that although early signs of stability – supported by improving economic indicators and favourable money market conditions – initially generated cautious optimism, investor sentiment was later dampened by regulatory measures, persistent macroeconomic pressures, and political uncertainty, pushing the market into a prolonged downward trajectory.

Moreover, lingering concerns over financial sector restructuring and election-related developments further constrained liquidity and investor participation.

On a more optimistic note, EBL Securities said that on the monetary front, liquidity conditions are expected to improve as the central bank is likely to ease monetary policy by lowering interest rates.

"This, it said, should accelerate private-sector credit growth, reinvigorate subdued capital investment, enhance corporate profitability, and restore overall business confidence. In line with monetary easing, the elected government is also expected to adopt a supportive fiscal policy stance to boost economic growth momentum," it said.

In the first half of 2025, the year began amid a series of policy-related developments, including reports of stricter loan classification rules for the banking sector, proposed tightening of margin loan regulations by the capital market taskforce, a stable tight monetary policy stance from the central bank, and unrest within the stock market regulator, collectively fostering a cautious and risk-averse sentiment across the trading floor.

The market subsequently entered a prolonged downtrend, weighed down by persistent macroeconomic uncertainties surrounding economic fears relating to proposed US reciprocal tariffs, negotiations with the IMF over remaining loan tranches, and apprehensions over probable tax hikes in pre-budget discussions.

Moreover, foreign investors pared back exposure amid concerns over further taka depreciation following the shift to a fully market-driven exchange rate regime, it said.

For the second half of 2025, the capital bourse sustained its recovery momentum in the early part of the second-half supported by favourable macroeconomic catalysts, including declining treasury yields, stable foreign exchange reserves, resilient export growth and steady remittance inflows, which lifted investor participation across the trading floor.

Moreover, central bank reform initiatives within the banking sector, coupled with expectations of a favourable resolution to US tariff-related negotiations, reinforced investor confidence and prompted selective accumulation in fundamentally strong stocks.

While uncertainties surrounding a draft amendment to margin rules tempered some investor enthusiasm, the announcement of the election roadmap provided renewed political clarity, lending further support to the market's recovery through August 2025.

From September onwards, the market's tone decisively shifted toward a sustained bearish phase as risk aversion gradually took hold across the trading floor.

Early profit-taking following prior gains disrupted upward momentum, while the approval of revised margin loan regulations further constrained liquidity, accentuating the selling pressure.

Sentiment weakened further amid heightened regulatory uncertainties, including concerns over the newly enacted margin rules, the proposed merger of five financially stressed Islamic banks, and draft plans for the potential liquidation of nine weak NBFIs.

A year of IPO drought

The primary market has remained frozen for over 1.5 years – an unprecedented and the longest dry spell in recent times.

Cancellation of pending IPOs, delays in proposed amendments to Public Issue Rules, and market uncertainties amid prevailing political cues have stalled primary market operations, adding further strain to investor sentiment during an already prolonged period of market downturn.

In 2025, no IPO was listed on the bourse and zero capital raising through IPO. In 2024, five IPOs were allowed to raise Tk661 crore from the capital market.

According to EBL Securities, since 2017, the highest IPOs were in 2018 and 2021, with 13 IPOs each year.  The highest amount of fundraising was in 2022, worth Tk1,188.6 crore.
 
Foreign investors' participation subdued

EBL said subdued foreign participation persisted throughout 2025, with foreign trade turnover contributing merely 3% of total market turnover during the year.

Prolonged market volatility, regulatory constraints, notable currency depreciation in recent times, and ongoing macroeconomic and political uncertainties pushed foreign investors mostly to the sidelines.

However, foreign investors' interest remained relatively resilient in selective value-driven bank stocks such as BRAC Bank, Prime Bank and City Bank.

In contrast, traditionally foreign-favoured blue-chip scrips – including Renata, British American Tobacco, MJL Bangladesh, Olympic Industries, Singer Bangladesh, Reckitt Benckiser (Bangladesh), Bangladesh Submarine Cable and Square Pharmaceuticals — saw a decline in foreign holdings, driven by reduced valuation appeal amid company-specific headwinds, along with market adversities.

Nevertheless, with the broader market currently trading at attractive valuation levels, a potential stabilisation in macro indicators and clarity on the political front post-election could pave the way for renewed foreign inflows in Bangladesh's capital market in the coming period.