Bank stocks shield market against decline

Infographics: TBS

Despite significant selling pressure following the removal of floor price restrictions, the benchmark index of the country's premier bourse managed to close in positive territory on Tuesday.

This resilience was largely attributed to the robust performance of bank stocks, effectively absorbing the market's downward pressure.

Market insiders say the Dhaka Stock Exchange (DSE) began the session with a 25-point decline, a day after 23 additional companies were taken out of the price restriction. On Thursday, the Bangladesh Securities and Exchange Commission lifted the floor for all but 35 scrips.

However, the banking sector later emerged as a stabilising force, preventing a significant plunge in the key index – DSEX.

At the end of the session, the DSEX registered a gain of 21 points, settling at 6,276, while the blue-chip index DS30 saw a surge of 10 points, closing at 2,158.

The turnover, a pivotal market indicator, at the DSE reached an eight-month high, surpassing the Tk1,100 crore mark.

On Tuesday, the turnover stood at Tk1,176 crore, reflecting a 13% growth compared to the previous session.

At the Dhaka bourse, 227 scrips declined, 126 advanced, and 40 remained unchanged.

Market insiders said investors displayed heightened activity in purchasing bank shares, which had long been restricted by the floor price, during the session.

Meaning that potential investors, who invested in the capital market for the long term by investing in fundamental stocks are back in the market, they added.

Investors reaped the highest return of 2.6% from the banking sector, with 31 out of the 35 listed banks experiencing advances, three remaining unchanged, and only one registering a decline.

Union Bank, IFIC Bank, and Global Islami Bank spearheaded the banking sector's upward momentum during the Tuesday market session.

EBL Securities said in its daily market commentary that the Dhaka bourse charged up, ridding on the bank sector, as the investors heightened optimism added strength to market momentum, which pushed the index to post significant gains.

The market indices rebounded since many investors resumed their trading activity and injected fresh capital into the stock market. This increased demand for many shares that had remained disregarded for a long time has boosted buyer dominance throughout the session, it added.

Institutional investors, including stock dealers, kept buying shares they preferred at a lower price, and the optimism for a recovery helped avert forced selling in leveraged accounts, said EBL Securities Managing Director Sayadur Rahman, who is also the president of CEO Forum, representing the top 30 brokerage firms owned by banks or other financial institutes.

Funds were initially flowing into large-cap stocks with strong fundamentals, and gradually buying appetite increased for other stocks too, he added.

Meanwhile, the BSEC on Monday evening announced freeing 23 more stocks from the floor price restriction, leaving only 12 large-cap ones.

After the removal of the floor price from 23 stocks, most of them faced massive selling pressure on Wednesday.

However, most of the stocks getting rid of the floor prices after being stuck there for long were yet to recover to the floor, and that caused a 2.28%, or over Tk18,000 crore, decline in the total market capitalisation at the DSE since floor withdrawal.

The total market value of all the DSE-listed scrips dropped to Tk7.69 lakh crore on Tuesday, from Tk7.87 lakh crore on 18 January.