DSEX slips below 5,300 after two months as market extends losing streak

Infographics: TBS

Dhaka stocks ended the week deep in the red yesterday (9 October), with the benchmark DSEX index dropping below the 5,300 mark for the first time in over two months amid continued investor caution and weakening market confidence. 

The DSEX fell by 54 points to close at 5,283, extending its losing streak to a fourth consecutive session. Over these four trading days, the index has shed a total of 164 points, while the market capitalisation has shrunk by Tk11,300 crore to stand at Tk7.17 lakh crore.

The blue-chip index DS30 also lost ground, falling by 18 points to 2,033, reflecting losses across large-cap stocks. 

Out of the 398 issues traded on the Dhaka Stock Exchange (DSE), 292 declined, 72 advanced, and 34 remained unchanged. 

Daily turnover fell 13% from the previous session to Tk530 crore, indicating fading investor participation and liquidity.

Market analysts attributed the persistent downtrend to a combination of seasonal factors, policy uncertainty, and cautious trading behavior among institutional investors. 

Rayhan Ahmed, senior research associate at EBL Securities, told The Business Standard that the market was going through a phase of subdued activity as many companies with June year-end closings were in the process of declaring their earnings.

"Our research shows that during the earnings declaration season for June-closing companies, the market usually follows a slightly downward trend, as investors tend to remain cautious during this time," he explained. 

"After the financial results and dividend declarations, investors reassess their positions and make new investment decisions, which typically helps the market regain some momentum," he said.

Rayhan further noted that speculation regarding the Bangladesh Securities and Exchange Commission's (BSEC) new margin rules had also created a sense of unease among investors. 

"There is talk that the regulator is finalising new margin lending rules, which might be gazetted later this year. Large investors who rely on margin facilities have become cautious, preferring to wait for clarity before making fresh investments," he said.

According to Rayhan, another wave of rumours regarding potential regulatory action has also spooked the market. 

"There are talks that the BSEC is preparing to take strict measures against several major investors, influential individuals, and institutions for alleged irregularities. This has led many large investors and firms to adopt a wait-and-see approach," he added.

On the policy front, he pointed out that the National Board of Revenue's (NBR) recent decision to raise the source tax on interest income from government bonds, from 10% to 15%, had added to investor concerns. 

"Although this change will not significantly impact institutional profitability, it has sent a negative signal to the market, weighing on overall sentiment," he said.

"As a result, investor confidence has weakened, and liquidity support in the market has declined, leading to both a fall in the index and a drop in turnover," Rayhan observed.

Rahima Food topped the list of gainers, rising 9.04%, followed by Dominage Steel with a 7.25% increase, Familytex up 5.88%, Exim Bank First Mutual Fund gaining 5.40%, and Acme Pesticides rising 4.37%.

On the losing side, several banking stocks took heavy hits, reflecting the sector's growing uncertainty. Union Bank and GSP Finance both plunged by 10%, while Social Islami Bank, Global Islami Bank, and Exim Bank lost 9.61%, 9.52%, and 9.30% respectively. First Security Islami Bank also dropped 6.45%.

Adding to the sector's pressure, the government's advisory council yesterday approved a proposal to merge five distressed Islamic banks into a single Shariah-based state-owned entity. 

The decision, endorsed at a meeting chaired by Chief Adviser Muhammad Yunus, aims to combine First Security Islami Bank, Global Islami Bank, Union Bank, Exim Bank, and Social Islami Bank into one institution.

Market insiders said the news of the merger added further uncertainty to banking stocks, which have been under pressure in recent months.