Stocks slip amid profit booking, portfolio rebalancing

After the latest quarterly financial statements disclosures, cautious investors are buying and selling stocks based on the business performances of listed firms.

Profit booking pressure in majority stocks pushed equity indices marginally down on Sunday.

DSEX, the broad-based index of the Dhaka Stock Exchange (DSE), closed 0.13% lower at 6,286, compared to the previous trading session.

EBL Securities, in its daily market commentary, said the market opened higher, with the core index crossing the 6,300-mark and remained afloat for the majority of the session.

However, sell pressure started to mount from mid-session, causing the benchmark index to fall into the red in the final hour of trading as cautious investors saw it as an opportunity to offload their holdings, it added.

Moreover, some recently rallied stocks have extended their correction mode as a result of profit-booking by some investors aiming to secure short-term gains.

Stock brokers said, as the broad market is inching up through a narrow channel instead of a sharp rise, smart investors are careful enough to book some of their profits in a wide range of stocks.

Also portfolio rebalancing — selling weak or overbought stocks and buying more potential ones — continued till the end of the session that helped some undervalued or oversold stocks gain on Sunday.

On the day, 43 scrips advanced while 133 declined.

On Thursday, only 89 of the 400 DSE scrips were in spontaneous trading having active bidders, and the number increased to 114 on Sunday as a number of stocks saw higher demand from the floor price levels or the narrowed down bottom circuit breaker.

Meanwhile, the Dhaka bourse observed an increase in participation as total turnover rose by 9.6% to Tk753 crore on Sunday.

According to stock brokers, the central bank's recent circular for halving banks' provisioning requirement against their loans to stock brokers, dealers and merchant banks helped boost confidence regarding the much needed financial strengthening of the capital market intermediaries, many of whom have been in an adverse situation due to the sliding market and the market illiquidity because of the floor price.

Also, the approved loan scheme from the International Monetary Fund, some firms' better than expected earnings in the October-December period, and the signs of improvement in the national balance of payment helped stock investors' confidence.

However, the upward pressure in interest rates, uncertainties regarding the commodities and fuel imports in the coming months are still holding investors cautious.

On the sectoral front, IT contributed most in the daily turnover – more than 21%, followed by pharmaceuticals and miscellaneous stocks.

Most of the sectors had mixed returns while travel and leisure, IT and services fell by 2.7%, 2.3% and 1.5% respectively.

Miscellaneous, cement and tannery sectors inched up with the help of investors' buying appetite in some of the sectoral stocks.

Indices in the Chittagong Stock Exchange (CSE) closed flat while turnover in the port-city bourse increased by 67% to Tk17.6 crore.