Dhaka stocks bounce back after five-day slump

The benchmark DSEX index of the Dhaka Stock Exchange (DSE) rebounded today (13 October) after five sessions as cautious investors returned to the trading floor, shaking off various rumours surrounding the ongoing political and economic uncertainties.

The DSEX increased by 25 points to close at 5,228, while the blue-chip DS30 index rose by 11 points to finish at 2,010. The shariah index was also up by 2 points, closing at 1,118.

Despite the decline in indices, market turnover increased by 19% to Tk737 crore, compared to Tk619 crore in the previous session. Out of 400 issues traded, 230 advanced, 120 declined, and 50 remained unchanged.

Market insiders say general investors are currently engaging in short-term profit-booking whenever they make small gains, as they believe the prevailing situation is not conducive to long-term investments.

They note that although the interim government has already outlined a roadmap for the upcoming national election, investors remain cautious. Many believe that the election period could affect both the capital market and the broader economy. As a result, most have adopted a wait-and-see approach before making any fresh investments.

Last week, the market experienced a temporary shock following a wave of political and economic rumours, which further weakened investor sentiment.

Despite the cautious tone, the market has shown signs of recovery, supported by investor interest in undervalued and fundamentally strong stocks. Experts believe the market will gradually regain momentum as government bills and bond rates continue to decline. Once the election schedule is officially announced, large investors who are currently on the sidelines are expected to return to trading floors.

Moreover, the increasing deposit mobilisation by banks is expected to inject additional liquidity into the financial system, helping stabilise the market.

The capital market regulator has also implemented several reform initiatives, some of which have already started yielding positive results. Analysts said that declining yields on government securities are making equities more attractive, as the average market return now exceeds 10%, encouraging investors to shift from bonds to stocks.

An analyst, requesting anonymity, shared his observation with TBS, saying that the market could strengthen further if Treasury bill and bond rates continue to fall. Upcoming dividend declarations and company disclosures could also spark renewed interest in fundamentally sound shares.

In its daily market commentary, EBL Securities stated that the ailing capital market managed to break out of its bearish spell as bargain hunters finally turned back and targeted a handful of stocks which they perceived to be trading at attractive price levels after the recent downturn.

The broad-based selling pressure eased as the recent downtrend led most investors to grapple with losses in their struggling portfolios, while selective buying support from opportunistic investors helped cushion the ailing market. However, cautious investors remained watchful and remained on the sidelines to monitor the market's trend surrounding the earnings season, according to the commentary.

On the sectoral front, the general insurance sector accounted for the highest turnover, contributing 12.2% of the total market trade value, followed by the textile sector with 11.5% and the bank sector with 11.4%.

Sectoral performance remained mixed throughout the session. Among the top gainers were general insurance (3.3%), travel (1.6%), and IT (1.3%) sectors, while paper (-1.4%), mutual fund (-0.9%), and services (-0.5%) sectors experienced the most notable corrections.